Chapter 15 Fiscal Policy

| November 9, 2018

11)
Contractionary policies are government policies that
A)
increase aggregate supply.
B)
decrease aggregate supply.
C)
decrease aggregate demand.
D)
increase aggregate demand.

12)
When the government develops policies to stabilize the economy
A)
these policies are unaffected by the multiplier effect.
B)
only expansionary fiscal policy is impacted by the multiplier effect.
C)
it needs to consider the multiplier effect for all fiscal policies.
D)
only contractionary fiscal policy is impacted by the multiplier effect.

13)
Due to the ________ effect, the final shift in aggregate demand is larger than
the initial shift in aggregate demand.
A)
income
B)
multiplier
C)
substitution
D)
crowding-out

14)
The idea that a $1 increase in infrastructure spending will generate more than
$1 in economic growth is a representation of
A)
the multiplier effect.
B)
an outside lag.
C)
an inside lag.
D)
an automatic stabilizer.

15)
Policies taken to move the economy closer to potential output
A)
must necessarily be expansionary policies.
B)
must necessarily be contractionary policies.
C)
are called stabilization policies.
D)
are lagging policies or automatic policies.

16)
Stabilization policies are policies designed to
A)
keep output constant.
B)
keep prices constant.
C)
move the economy closer to potential output.
D)
increase trade.

17)
What is the reason that stabilization policies do not have an immediate effect
on an economy?
A)
Consumers are slow to catch up on spending.
B)
There is a time lag for policies to take effect.
C)
Imports come into the country too fast.
D)
Exports often are not shipped fast enough.

18)
The time it takes to formulate a policy is known as
A)
fiscal policy.
B)
crowding out.
C)
inside lags.
D)
outside lags.

19)
The time it takes for a policy to actually work is known as
A)
fiscal policy.
B)
crowding out.
C)
inside lags.
D)
outside lags.

20)
The fact that it takes time for government to identify and recognize a problem
is one reason for the occurrence of
A)
inside lags.
B)
outside lags.
C)
implementation lags.
D)
structural lags.

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