Question 1)The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment real GDP is a(n):A. expenditure multiplier gap.B. negative net export gap.C. recessionary expenditure gap.D. inflationary expenditure gap. Question 2)An increase in disposable income:a. increases consumption by moving upward along a given consumption schedule.b. increases consumption because it shifts the consumption schedule upward.c. decreases consumption by moving downward along a given consumption schedule.d. decreases consumption because it shifts the consumption schedule downward.Question 3)The investment schedule shows thea. positive relationship between the expected rate of return and the quantity of investment demanded.b. inverse relationship between the expected rate of return and the quantity of investment demanded.c. rate of interest that business firms must pay when they make investments in capital goods.d. amounts business firms collectively intend to invest at each possible level of real GDP.Question 7)Answer the next question based on the following list of items that are related to aggregate demand and/or aggregate supply.1) Government Spending2) Consumer Expectations3) Degree of Excess Capacity4) Personal Income Tax Rates5) Productivity6) National Income Abroad7) Business Taxes8) Domestic Resource Availability9) Prices of Imported Products10) Profit Expectations on InvestmentsChanges in which combination of factors best explain why the aggregate supply curve would shift?a. 3 and 6b. 1 and 2c. 2 and 10d. 7 and 8Question 13)When the federal government changes purchases and/or taxes to stimulate the economy or rein in inflation, such policy is:a. discretionary fiscal policy.b. active federal policy.c. automatic fiscal policy.d. active monetary policy.Question 15)Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy’s current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals:a. 5.b. 10.c. 2.d. 4.Question 16)Which of the following fiscal policy changes would be the most contractionary?a. a $10 billion increase in taxes and a $30 billion cut in government purchasesb. a $30 billion increase in taxes and a $10 billion cut in government purchasesc. a $20 billion increase in taxes and a $20 billion cut in government purchasesd. a $40 billion increase in taxes
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