If the multiplier for government spending is 1.60 and government spending is increased by $160 billion, calculate the amount by which the demand…

1.If the multiplier for government spending is 1.60 and government spending is increased by ​$160

​billion, calculate the amount by which the demand curve will ultimately shift.

Shift of the demand curve​ =

​$nothing

billion. ​(Enter your response as an integer and include a minus sign if​ necessary.)

2. Debit Cards as a Fiscal Stimulus. Here is one unusual fiscal​ policy: The government would issue​ time-dated debit cards to each person that had to be spent on goods and services produced only by U.S. firms within a fixed period​ (say, three​ months) or become worthless. Suppose the government was considering whether to issue​ $400 in​ time-dated debit cards to each household or give each household​ $400 in cash instead.

Suppose a family had large credit card​ debt, which it wished to reduce. Of the two​ plans, the family would prefer

A.

the cash payments​ program, since cash could be used to pay off some of the credit card debt.

B.

the debit card​ program, since they did not need to use cash to buy goods and services.

C.

​neither, since the credit card was fixed and was dependent on the interest rate.

D.

both of them​ equally, since they involved payments of equal size.

3. Looking Backwards. Some critics of stabilization policy say that policymakers are always looking

backwards long dash through a rear view mirror at past data long dash and

thus cannot conduct stabilization policy.

Which of the following is a defense for​ policymakers?

A.

​Recently, the recognition of lags in data collection has eliminated the use of stabilization policies.

B.

Economic forecasts using past data are better than forecasts using current data.

C.

Sometimes economic conditions require that stabilization policies be enacted by relying on the best available data.

D.

​Recently, analysts have found that future trends usually follow past data.

4. The largest component of federal spending is

discretionary spending

consumption spending

deficit spending

entitlement spending

.

5. Which of the following is an entitlement​ program?

A.

Medicare spending

.

B.

Corporate income taxes

.

C.

Government investment spending

.

D.

Personal consumption expenditure

6. Automatic Stabilizers and Fluctuations in Output. Because of automatic​ stabilizers, the states that have a more generous unemployment insurance program experience

smaller

no

larger

fluctuations in output.

7. Annual government spending not stipulated by existing laws is called

A.

inflationary.

B.

entitlement.

C.

mandatory.

D.

discretionary.

8. Based on the​ Laffer’s theory why do lower tax rates increase government​ revenue?

A.

Companies will hire fewer workers when taxes are lower.

B.

Workers will be willing to work less when taxes are lower.

C.

Workers will think it is unfair when the government taxes them less.

D.

When workers get to keep more of their​ salary, they will work harder thus increasing the tax base

9. Long-run average income is known as

permanent income

national income

disposable income

.

10. What was the effect on the economy from the Kennedy and Johnson tax​ cuts?

A.

Real GDP and consumption grew at rates of​ 4% each year between 1963 and 1966.

B.

Real GDP and consumption were unchanged from what they would have been.

C.

Real GDP and consumption declined each year between 1963 and 1966.

D.

Real GDP and consumption were unchanged entirely.







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