Econ 102 - Principles of Macroeconomics » Spring 2023 » AS/AD Model The Supply-Side Re-emerges Quiz

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Question #1
Why does a tax change affect aggregate demand?
A.   A tax change alters imports and net exports.
B.   A tax change alters government spending by an equal amount.
C.   A tax change alters saving by an equal amount.
D.   A tax change alters disposable income and consumption spending.
Question #2
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's impossible to know without the multiplier.
B.   It will remain the same.
C.   It will decrease.
D.   It will increase.
Question #3
If wealthy U.S. consumers save most of their tax cut, this means that, compared to government spending changes,
A.   tax changes would have a weaker multiplier effect.
B.   government spending would have a weaker multiplier effect.
C.   tax changes would have a higher multiplier effect.
D.   U.S. consumers would spend all of their tax cut.
Question #4
To eliminate an inflationary gap, the aggregate demand curve should
A.   shift inward.
B.   shift outward.
C.   become horizontal.
D.   become vertical.
Question #5
Fiscal policy consists of
A.   taxes and government spending.
B.   the money supply and taxes.
C.   taxes and interest rates.
D.   government purchases and defense spending.
Question #6
If personal income taxes are increased, disposable income and consumption
A.   stay the same.
B.   decrease.
C.   change in an unpredictable direction.
D.   increase.
Question #7
Historically, the government has used fiscal policy to effect the economy through
A.   central planning.
B.   aggregate demand
C.   indicative planning.
D.   aggregate supply
Question #8
Taxes reduce total spending
A.   directly by increasing government purchases by an equal amount.
B.   indirectly by reducing disposable income.
C.   indirectly by reducing government spending.
D.   directly by substituting investment spending.
Question #9
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 money.
D.   the supply of imports.
Question #10
Decreasing aggregate demand to eliminate an inflationary gap often creates the problem of
A.   increasing the labor force.
B.   increasing inflation.
C.   unemployment.
D.   increasing real GDP.

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