If money is used as a mechanism to transform current purchases into future purchases it is functioning as a a. standard of value. b. store of value. c. medium of exchange. d. unit of account. An increase in government spending will have the greatest impact on the economy if it is combined with a. an increase in tax revenue. b. a tax cut. c. unchanged tax revenue. d. none of the above. 1 points The use of government spending and taxation to affect real GDP is called a. fiscal policy. b. monetary policy. c. Federal Reserve policy. d. none of the above. The crowding out effect associated with government borrowing to finance an increase in government spending means that a. higher interest rates crowd out lower interest rates. b. the increased government spending decreases total spending in the economy. c. private spending replaces government spending. d. government spending replaces private spending.
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An expansionary fiscal policy that takes the form of an increase in government purchases carries the possibility that private investment and, as a result, the future growth rate of a. Is crowded out; potential output is reduced b. Rises to an unsustainable level; real GDP is reduced c. Increases; net exports increases. d. Is crowded out; corporate tax revenue is reduced e. Increases; aggregate demand increases
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Which of the following activities represent(s) the use of fiscal policy? A. The economy is expanding and the government increases the income tax rate. B. The economy is doing poorly and government cuts back on spending in an attempt to balance the budget. C. The government restricts the purchase of cigarettes. D. The economy is expanding and the Federal Reserve decides to take steps to decrease the money supply. E. The economy is expanding, but because of concerns about pollution, the government passes tougher antipollution regulations. F. The economy is in a recession and a privately funded advertising program encourages consumers to purchase more goods and services.
(Fiscal Policy) Define fiscal policy. Determine whether each of the following, other factors held constant, would, in the short run, lead to an increase, a decrease, or no change in the level of real GDP demanded: a. A decrease in government purchases b. An increase in net taxes c. A reduction in transfer payments d. A decrease in the marginal propensity to consume
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