Question

1.If the MPC is equal to 0.9 and investment spending increases by $50 billion what is the result

a.GDP increases $450M

GDP increases $ 50M

GDP increases $500M

GDP decreases $450M

2.Rising inventories usually indicate:

A.an economy that grows unexpectedly.

B.an economy that slows unexpectedly

C.an unexpected spurt in sales.

D.an inflationary cycle.

3.Lowering taxes and increasing spending will likely

A.Increase Deficits and the National Debt

B.Decrease Deficits and the National Debt

C.Have no impact on Deficits or the National Debt

D.Increase Unemployment

4.The major tools of fiscal policy are

A.Money Supply

B.Interest Rates

C.Taxes and Government Spending

D.All of these

5.Who carries out Fiscal Policy in the United States?

A.The Fed

B.Congress

C.Congress and The President

D.The President

6.Which of the following is an expansionary fiscal policy?

A.Increase Taxes

B.Increase Government Spending

C.Reduction in Government Spending

D.None of these

7.Which of the following is a contractionary fiscal policy?

A.Increase Taxes

B.Increase Government Spending

C.Reduction in Government Spending

D.None of these

8.Expansionary fiscal policy is an increase in government expenditures and/or decrease in taxes

A.True

B.False

9.All economist agree that Fiscal Policy should be used to influence the business cycle?

A.True

B.False

10.Prior to the Great Depression most economists thought the economy would self correct in a timely way

A.True

B.False

11.When taxation income exceeds government spending this is called a

A.deficit

B.surplus

C.balanced budget

D.none of these

12.Banks are required to have all deposits on hand and available on demand by all customers

A.True

B.False

Answer 1

1. GDP increases $500M

2.B.an economy that slows unexpectedly.

As, rising inventories would mean the goods which are meant to be sold are not selling due to lack of demand of some other reasons. This shows how slow the economy is.

3.A.Increase Deficits and the National Debt.

As, taxes are a source of the government and if it reduces tax, there would be not enough fund and at that time, increment in spending would most probably be funded by taking international loans leading to increase deficits and national debt .

4.taxes and government spending.

Remove (taxes) and expenditure comes under the fiscal policy. Money supply and the interest rates comes under the monetary policy.