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 disposable income.
B.   indirectly by reducing government spending.
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 the labor force.
B.   increasing real GDP.
C.   unemployment.
D.   increasing inflation.
Question #3
Critics of supply-side economics argue that a major flaw is
A.   All of these.
B.   the small magnitude of supply-side effects.
C.   the large size of demand-side effects
D.   increased income inequality.
Question #4
The central idea of supply-side tax cuts is that certain types of tax cuts will increase
A.   aggregate demand.
B.   aggregate supply.
C.   the supply of imports.
D.   the supply of money.
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 government spending by an equal amount.
C.   A tax change alters imports and net exports.
D.   A tax change alters disposable income and consumption spending.
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 increase.
B.   GDP will not change but prices will rise.
C.   GDP will decrease.
D.   GDP will not change but employment will increase.
Question #7
To eliminate an inflationary gap, the aggregate demand curve should
A.   become vertical.
B.   become horizontal.
C.   shift inward.
D.   shift outward.
Question #8
The Japanese economy is stuck in a recessionary gap. The proper fiscal policy could include a(n)
A.   increase in government purchases.
B.   increases in transfer payments.
C.   All of these are correct.
D.   decrease in taxes.
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 increase.
B.   It will remain the same.
C.   It's impossible to know without the multiplier.
D.   It will decrease.
Question #10
If personal income taxes are increased, disposable income and consumption
A.   increase.
B.   decrease.
C.   change in an unpredictable direction.
D.   stay the same.

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