Question :
11) Refer to Figure 18-6. In the dynamic model of : 1244873
11) Refer to Figure 18-6. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely pursue
A) expansionary fiscal policy.
B) contractionary fiscal policy.
C) expansionary monetary policy.
D) contractionary monetary policy.
E) expansionary automatic stabilizers.
12) Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy? A significant
A) decrease in oil prices.
B) decrease in real GDP.
C) increase in inflation.
D) increase in labor productivity.
13) If the economy is slipping into a recession, which of the following would be an appropriate fiscal policy?
A) an increase in the money supply and a decrease in interest rates
B) a decrease in government purchases
C) a decrease in taxes
D) a decrease in oil prices
Figure 18-7
14) Refer to Figure 18-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?
A) increase taxes
B) increase government spending
C) contractionary fiscal policy
D) decrease interest rates
15) Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.
A) decreases; increases
B) increases; decreases
C) increases; increases
D) decreases; decreases
16) If policy makers are concerned that the economy is in danger of rising inflation because aggregate demand is increasing faster than aggregate supply, the appropriate fiscal policy response is to
A) increase taxes.
B) increase government spending.
C) use expansionary fiscal policy.
D) increase interest rates.
Figure 18-8
17) Refer to Figure 18-8. In the graph above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Congress and the president use to move the economy to point C?
A) increase government purchases
B) decrease government purchases
C) increase income taxes
D) sell Treasury bills
Figure 18-9
18) Refer to Figure 18-9. Given that the economy has moved from A to B in the graph above, which of the following would the appropriate fiscal policy to achieve potential GDP?
A) increase taxes
B) increase government spending
C) decrease the money supply
D) increase interest rates
19) To combat inflation, Congress and the president should
A) decrease government spending.
B) decrease taxes.
C) raise interest rates.
D) increase transfer payments.
Figure 18-10
20) Refer to Figure 18-10. In the graph above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Congress and the president use to move the economy to point C?
A) increase income taxes
B) increase government spending
C) buy Treasury bills
D) decrease the discount rate
Table 18-1
Year
Potential Real GDP
Real GDP
Price Level
2013
$14.0 trillion
$14.0 trillion
150
2014
14.5 trillion
14.2 trillion
152
