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.   directly by substituting investment spending.
C.   indirectly by reducing government 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.   increasing the labor force.
C.   increasing real GDP.
D.   unemployment.
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.   All of these.
D.   the small magnitude of supply-side effects.
Question #4
The central idea of supply-side tax cuts is that certain types of tax cuts will increase
A.   the supply of money.
B.   aggregate supply.
C.   the supply of imports.
D.   aggregate demand.
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 disposable income and consumption spending.
D.   A tax change alters imports and net exports.
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 decrease.
B.   GDP will increase.
C.   GDP will not change but prices will rise.
D.   GDP will not change but employment will increase.
Question #7
To eliminate an inflationary gap, the aggregate demand curve should
A.   become horizontal.
B.   become vertical.
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.   decrease in taxes.
B.   increase in government purchases.
C.   All of these are correct.
D.   increases in transfer payments.
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 will decrease.
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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