Which of the following changes in taxes would lead to the greatest increase in consumption?
a. a 20,000 decrease in taxes, if MPC equals 0.5
b. a 12,000 decrease in taxes, if MPC equals 0.75
c. a 15,000 decrease in taxes, if MPC equals 0.6
d. a 30,000 decrease in taxes, if MPC equals 0.25
Question 2The U.S. government deficit as a percentage of GDP was much larger during World War II than it was in the 1980s and 1990s.
a. True
b. False
Indicate whether the statement is true or false
Question 3Sellers who were originally willing to supply 800 units of a good at 4 per unit are now willing to supply 600 units at 4 per unit. That change would be described as:
a. an increase in supply.
b. a decrease in supply.
c. an increase in quantity supplied.
d. a decrease in quantity supplied.
Question 4Which of the following changes in disposable income would lead to the smallest increase in consumption?
a. a 20,000 increase in disposable income, if MPC equals 0.5
b. a 12,000 increase in disposable income, if MPC equals 0.75
c. a 15,000 increase in disposable income, if MPC equals 0.6
d. a 30,000 increase in disposable income, if MPC equals 0.25
Question 5Empirical evidence suggests that the United States ran close to a balanced budget during the World War II.
a. True
b. False
Indicate whether the statement is true or false
Question 6Which of the following is not a determinant of supply?
a. input prices
b. technology
c. tastes
d. expectations
Question 7Which of the following changes in disposable income would lead to the greatest increase in consumption?
a. a 20,000 increase in disposable income, if MPC equals 0.5
b. a 12,000 increase in disposable income, if MPC equals 0.75
c. a 15,000 increase in disposable income, if MPC equals 0.6
d. a 30,000 increase in disposable income, if MPC equals 0.25
Question 8If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more than indicated by the government spending multiplier.
a. True
b. False
Indicate whether the statement is true or false
Question 9Which of the following is true?
a. A decrease in the price of ice cream would cause a decrease in the demand for frozen yogurt, a substitute.
b. Just as demanders will demand more now if the price of a good is expected to rise in the near future, sellers will supply more now if the price of a good is expected to rise in the near future.
c. An increase in supply leads to a movement up along the supply curve.
d. Both technological progress and cost-increasing regulations will increase supply.
Question 10A given change in disposable income would have the smallest effect on aggregate demand with which of the following marginal propensities to consume?
a. 0.4
b. 0.6
c. 0.8
d. 0.2
Question 11An increase in deficit spending tends to raise interest rates, thereby resulting in a multiplier effect that is higher than what would be associated with an equivalent increase in consumption spending.
a. True
b. False
Indicate whether the statement is true or false
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