The tax multiplier is equal to the spending multiplier.

The tax multiplier is equal to the spending multiplier.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 2

The proponents of rational expectations believe that:
 a. there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy.
  b. macro-policies that stimulate demand and place upward pressure on the general level if prices will temporarily increase output and employment.
  c. the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal.
  d. discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.

QUESTION 3

Suppose that your income during Year X was 50,000 . and the CPI for Year X was 150 (base year = Z=100). Back in Year Z your income was 30,000 . Has your real income increased or decreased from Z to year X? By how much?
 a. Increased by 5,000.
  b. Increased by 3,333.
  c. Unchanged.
  d. Decreased by 3,333.
  e. Decreased by 5,000.

QUESTION 4

The marginal propensity to save plus the marginal propensity to consume always equals 1.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 5

The rational expectations hypothesis indicates that people:
 a. pay little attention to policy when forming their expectations about the future.
  b. expect the next period to be pretty much like the recent past, regardless of policy changes.
  c. will always be able to forecast the future accurately.
  d. change their expectations about the future if policy changes.

QUESTION 6

Disinflation means a decrease in:
 a. the rate of inflation.
  b. the general level of prices in the economy.
  c. the prices of all products in the economy.
  d. the circular flow.