Econ 102 - Principles of Macroeconomics » Fall 2022 » AS AD Model The Supply-Side Re-emerges Quiz

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Question #1
Taxes reduce total spending
A.   indirectly by reducing government spending.
B.   indirectly by reducing disposable income.
C.   directly by substituting investment spending.
D.   directly by increasing government purchases by an equal amount.
Question #2
Decreasing aggregate demand to eliminate an inflationary gap often creates the problem of
A.   increasing inflation.
B.   unemployment.
C.   increasing real GDP.
D.   increasing the labor force.
Question #3
Critics of supply-side economics argue that a major flaw is
A.   increased income inequality.
B.   the large size of demand-side effects
C.   the small magnitude of supply-side effects.
D.   All of these.
Question #4
The central idea of supply-side tax cuts is that certain types of tax cuts will increase
A.   the supply of imports.
B.   aggregate demand.
C.   the supply of money.
D.   aggregate supply.
Question #5
Why does a tax change affect aggregate demand?
A.   A tax change alters saving by an equal amount.
B.   A tax change alters imports and net exports.
C.   A tax change alters disposable income and consumption spending.
D.   A tax change alters government spending by an equal amount.
Question #6
In an effort to balance the federal budget, an increase in Social Security taxes is passed. What is the most likely effect of this on equilibrium GDP?
A.   GDP will not change but employment will increase.
B.   GDP will increase.
C.   GDP will decrease.
D.   GDP will not change but prices will rise.
Question #7
To eliminate an inflationary gap, the aggregate demand curve should
A.   shift outward.
B.   become horizontal.
C.   shift inward.
D.   become vertical.
Question #8
The Japanese economy is stuck in a recessionary gap. The proper fiscal policy could include a(n)
A.   increases in transfer payments.
B.   All of these are correct.
C.   decrease in taxes.
D.   increase in government purchases.
Question #9
The president wishes to increase spending for education by $4 billion but also maintain a balanced budget. Therefore, taxes will also be increased by $4billion. What will happen to GDP?
A.   It will decrease.
B.   It will increase.
C.   It will remain the same.
D.   It's impossible to know without the multiplier.
Question #10
If personal income taxes are increased, disposable income and consumption
A.   increase.
B.   stay the same.
C.   change in an unpredictable direction.
D.   decrease.

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