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.   directly by substituting investment spending.
B.   indirectly by reducing disposable income.
C.   directly by increasing government purchases by an equal amount.
D.   indirectly by reducing government spending.
Question #2
Decreasing aggregate demand to eliminate an inflationary gap often creates the problem of
A.   unemployment.
B.   increasing the labor force.
C.   increasing real GDP.
D.   increasing inflation.
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.   aggregate supply.
B.   the supply of money.
C.   aggregate demand.
D.   the supply of imports.
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 government spending by an equal amount.
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 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 vertical.
C.   shift inward.
D.   become horizontal.
Question #8
The Japanese economy is stuck in a recessionary gap. The proper fiscal policy could include a(n)
A.   decrease in taxes.
B.   increase in government purchases.
C.   increases in transfer payments.
D.   All of these are correct.
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 remain the same.
B.   It will decrease.
C.   It's impossible to know without the multiplier.
D.   It will increase.
Question #10
If personal income taxes are increased, disposable income and consumption
A.   increase.
B.   change in an unpredictable direction.
C.   decrease.
D.   stay the same.

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