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

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