Multiplier And Stuff Test

Question 1

Does government spending or tax decreases have a bigger affect?

Answer 1

Government spending

Question 2

What is the multiplier equation?

Answer 2

1/MPS

Question 3

How do you find MPS?

Answer 3

1-MPC

Question 4

What can you do with your money?

Answer 4

Save it or spend it

Question 5

How can you figure out the multiplier from the graph?

Answer 5

Change in x/change in y
Or
GDP/DI

Question 6

Why would we want neighboring countries’ economies to grow?

Answer 6

It gives us another trading partner so we would have more exports and more imports

Question 7

If our currency appreciates what happens regarding trade?

Answer 7

Exports decrease, imports increase

Question 8

What is discretionary fiscal policy?

Answer 8

Actions that are chosen to take affect

Question 9

What is automatic policy?

Answer 9

It occurs do to the normal cycle of the business cycle

Question 10

What are examples of automatic fiscal policy?

Answer 10

Recession raising unemployment compensation, Income raises so people pay more income tax

Question 11

What are some examples of discretionary fiscal policy?

Answer 11

Government cuts personal income tax, government raised social security taxes, government raises corporate income tax

Question 12

What is the employment act of 1946?

Answer 12

It commits the government to take actions to maintain stability in the economy

Question 13

What is the council of economic advisors?

Answer 13

They help the president with economic decisions

Question 14

What is the joint economic council?

Answer 14

It investigated economic problems, it helps the president “fight the war against the business cycle”

Question 15

What are contractionary policies?

Answer 15

They drive down the economy when inflation is occurring

Question 16

How does the government contract the economy?

Answer 16

Raise taxes or decrease government spending

Question 17

What is expansionary policy?

Answer 17

Policy that drives the economy out of recession

Question 18

What are ways the government expands the economy?

Answer 18

Lower taxes and increased government spending

Question 19

Is inflation or unemployment more important to take care off?

Answer 19

Unemployment

Question 20

Why must tax cuts be larger than gov. Spending increases?

Answer 20

Because people have a propensity to save rather than consume

Question 21

To counteract the economy fiscal policy must be?

Answer 21

Counter cyclical

Question 22

Can the multiplier be used to drive down the economy?

Answer 22

Yes, it works both ways

Question 23

Borrowing and money creation are examples of?

Answer 23

Expansion

Question 24

Debt reduction and idle surplus are examples of?

Answer 24

Contraction

Question 25

Why is government spending perfectly elastic(horizontal)?

Answer 25

They don’t run out of funds and don’t ever completely stop spending

Question 26

What is an automatic stabilizer?

Answer 26

The progressive tax

Question 27

Where is deficit located on a graph?

Answer 27

The area to the left of the equilibrium

Question 28

On a graph, where is surplus located?

Answer 28

To the right of the equilibrium

Question 29

What is another built in economic stabilizer?

Answer 29

Any event that acts counter cyclical to the business cycle

Question 30

Why does a balanced budget not work?

Answer 30

In times of hyperinflation or recession the government has no discretionary power to change spending, so the only way to try to fix it is change taxes which worsens both

Question 31

What is recognition lag?

Answer 31

You don’t realize your in a recession until it’s too late to prevent it

Question 32

What is administrative lag?

Answer 32

Government action takes too long to take effect

Question 33

What is operational lag?

Answer 33

It takes too long for actions to have an impact on the economy

Question 34

What is the crowding out effect?

Answer 34

A rise in interest rates results in decreased consumer investment because the government increases its investments; this reduces the multiplier

Question 35

What happens to exports as expansionary policy is enacted?

Answer 35

They decline

Question 36

What happens to net exports as contractionary policy is enacted?

Answer 36

Exports increase

Question 37

What do supporters of supply side economics believe?

Answer 37

That lowering taxes and reducing government programs will give incentive to work and people will reinvest in business which will increases the persons tax bracket so aka. They pay more taxes

Question 38

What is the tax multiplier formula?

Answer 38

-MPC/MPS

Question 39

Investment and government spending multiplier?

Answer 39

1/MPS

Question 40

Exports are an?

Answer 40

Injection

Question 41

Imports are a

Answer 41

Leakage

Question 42

When on the LRAS curve you are at the end of the intermediate phase what action should be taken?

Answer 42

Nothing, the economy is good!!

Question 43

If you are in the recessionary phase of the LRAS curve what should you do?

Answer 43

Enact expansionary policy

Question 44

If you are in the inflationary phase of the LRAS curve what should you do?

Answer 44

Enact contractionary policy

Question 45

If you are at the beginning of the intermediate phase of the LRAS curve what should you do?

Answer 45

Enact slight expansionary policy

Question 46

If you increase taxes and decrease gov spending you are enacting what policy?

Answer 46

Contractionary

Question 47

Increasing taxes and increases government spending are what kind of policy?

Answer 47

Off setting

Question 48

Decreasing taxes and decreasing gov spending are what kind of policy?

Answer 48

Off setting

Question 49

Decreased taxes and increased gov spending are what kind of policy?

Answer 49

Expansionary