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

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