DEVRY ECO312 WEEK 5 WEEKLY ASSIGNMENT

Question 1. Question
:
(TCO 6) Discretionary fiscal policy refers to

any change in government spending or taxes
that destabilizes the economy.
the authority that the President has to change
personal income tax rates.
intentional changes in taxes and government
expenditures made by Congress to stabilize the economy.
the changes in taxes and transfers that occur
as GDP changes.

Question 2. Question
:
(TCO 6) Suppose that the economy is in the midst of a
recession. Which of the following policies would most likely end the recession
and stimulate output growth?

A Congressional proposal to incur a Federal
surplus to be used for the retirement of public debt.
Reductions in agricultural subsidies and
veterans’ benefits.
Postponement of a highway construction
program.
Reductions in Federal tax rates on personal
and corporate income.

Question 3. Question
:
(TCO 6) The financing of a government deficit increases
interest rates and, as a result, reduces investment spending. This statement
describes

the supply-side effects of fiscal policy.
built-in stability.
the crowding-out effect.
the net export effect.

Question 4. Question
:
(TCO 5) The determinants of aggregate supply

are consumption, investment, government, and
net export spending.
explain why real domestic output and the price
level are directly related.
explain the three distinct ranges of the
aggregate supply curve.
include resource prices and resource
productivity.

Question 5. Question
:
(TCO 6) In an effort to avoid recession, the government
implements a tax rebate program, effectively cutting taxes for households. We
would expect this to

affect neither aggregate supply nor aggregate
demand.
increase aggregate demand.
reduce aggregate demand.
reduce aggregate supply.

Question 6. Question
:
(TCO 6) The consumption schedule directly relates

consumption to the level of disposable income.
saving to the level of disposable income.
disposable income to domestic income.
consumption to saving.

Question 7. Question
:
(TCO 6) Dissaving means

the same thing as disinvesting.
that households are spending more than their
current incomes.
that saving and investment are equal.
that disposable income is less than zero.

Question 8. Question
:
(TCO 5) Refer to the graph. Which of the following changes
will shift AD1 to AD2?

Graph Description

A cut in personal and business taxes
An increase in the value of the dollar
relative to other currencies
A shrinkage in the value of stocks and other
financial assets
An increase in real interest rates

Question 9. Question
:
(TCO 6) The multiplier is

1/MPC.
1/(1 + MPC).
1/MPS.
1/(1 – MPS).

Question 10. Question
:
(TCO 5) The Federal budget deficit is found by

subtracting government tax revenues plus
government borrowing from government spending in a particular year.
subtracting government tax revenues from
government spending in a particular year.
cumulating the differences between government
spending and tax revenues over all years since the nation’s founding.
subtracting government revenues from the
noninvestment-type government spending in a particular year.

Question 11. Question
:
(TCO 5) What effect would each of the following have on
aggregate demand or aggregate supply? Explain.

Question 12. Question
:
(TCO 6) Why do some economists believe that tax cuts are
critical to help revive an economy experiencing a recession?