Question 1

Suppose investment spending falls.To offset the change in output the Federal Reserve could

Accepted Answer

By increasing the money supply, the Federal Reserve could stimulate spending and investment, helping to offset the decline in investment spending. This would also help to bring the price level back towards its original value.

Question 2

A 2009 article in The Economist noted that

Accepted Answer

The article specifically states that "most of the empirical work on multipliers has focused on spending changes, often associated with changes in military expenditures." Therefore, option C is the only correct statement. Option A is incorrect because the article actually notes that estimates of fiscal multipliers have varied significantly across studies. Option B is incorrect because the article actually suggests that the evidence on multipliers for tax cuts is less clear-cut than for spending changes, and that the size of multipliers depends on a range of factors.

Question 3

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

Accepted Answer

The Obama administration's economists estimated a multiplier of 1.6 for government purchases and 1.0 for tax cuts during the 2008-2009 economic downturn.

Question 4

A​ccording to the IGM poll,what percentage of economists polled agreed that the benefits of ARRA exceeded the costs?

Accepted Answer

The IGM poll found that 75% of economists polled agreed that the benefits of ARRA exceeded the costs.

Question 5

One of President Obama's first fiscal policy initiatives was​

Accepted Answer

One of President Obama's first fiscal policy initiatives was the American Recovery and Reinvestment Act (ARRA), which was signed into law in February 2009.

Question 6

A tax cut targeted at ---- people may have a bigger effect because ​

Accepted Answer

Poorer people tend to have a higher marginal propensity to consume, meaning they are likely to spend a larger fraction of any additional income they receive. This means that a tax cut targeted at poorer people is likely to have a bigger effect on boosting consumption and stimulating the economy compared to a tax cut targeted at wealthier people who may save more of their additional income.

Question 7

A 2009 article in The Economist noted that some studies have provided evidence indicating that multipliers are

Accepted Answer

Multipliers tend to be larger in closed economies because there are fewer leakages from the spending cycle, such as imports, which are more prevalent in open economies.

Question 8

Suppose stock prices rise.To offset the resulting change in output the Federal Reserve could

Accepted Answer

Decreasing the money supply would reduce aggregate demand, counteracting the increase in output and price level caused by rising stock prices, thus moving the price level closer to its original value.

Question 9

The G20 countries introduced stimulus packages that averaged ---- of GDP in 2009 and ---- in 2010.

Accepted Answer

In 2009, the G20 countries introduced stimulus packages that averaged 2% of GDP, and in 2010, the average was 1.6% of GDP.

Question 10

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

Accepted Answer

The answer of Suppose foreigners find U.S.goods and services more...

Question 11

If it were not for the automatic stabilizers in the U.S.economy,

Accepted Answer

Automatic stabilizers, such as unemployment insurance and progressive taxation, help to cushion the impact of economic downturns and stabilize output and employment. Without these stabilizers, the economy would be more susceptible to volatility and fluctuations. Therefore, D is the best choice. A, B, and C are not necessarily true statements and do not relate directly to the role of automatic stabilizers in the economy.

Question 12

According to a 2009 article in The Economist,the multiplier effect and crowding-out effect would exactly offset each other when the economy is

Accepted Answer

When an economy is operating at full capacity, there is little room for extra production, so the multiplier effect of increased government spending is likely to be countered by the crowding-out effect, where the increased demand for resources leads to higher prices and interest rates that reduce private investment. Therefore, in such a scenario, the two effects would cancel out each other, and there would be no significant impact on the overall level of economic activity.

Question 13

According to the IGM poll,what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Accepted Answer

97% of economists polled agreed that the unemployment rate at the end of 2010 was lower with the American Recovery and Reinvestment Act (ARRA) than it would have been without it.

Quiz 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: Using Policy to Stabilize the Economy

Suppose investment spending falls.To offset the change in output the Federal Reserve could

A 2009 article in The Economist noted that

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

According to the IGM poll,what percentage of economists polled agreed that the benefits of ARRA exceeded the costs?

One of President Obama's first fiscal policy initiatives was

A tax cut targeted at ---- people may have a bigger effect because

A 2009 article in The Economist noted that some studies have provided evidence indicating that multipliers are

Suppose stock prices rise.To offset the resulting change in output the Federal Reserve could

The G20 countries introduced stimulus packages that averaged ---- of GDP in 2009 and ---- in 2010.

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

If it were not for the automatic stabilizers in the U.S.economy,

According to a 2009 article in The Economist,the multiplier effect and crowding-out effect would exactly offset each other when the economy is

According to the IGM poll,what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Quiz 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: Using Policy to Stabilize the Economy

Suppose investment spending falls.To offset the change in output the Federal Reserve could

A 2009 article in The Economist noted that

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

A​ccording to the IGM poll,what percentage of economists polled agreed that the benefits of ARRA exceeded the costs?

One of President Obama's first fiscal policy initiatives was​

A tax cut targeted at ---- people may have a bigger effect because ​

A 2009 article in The Economist noted that some studies have provided evidence indicating that multipliers are

Suppose stock prices rise.To offset the resulting change in output the Federal Reserve could

The G20 countries introduced stimulus packages that averaged ---- of GDP in 2009 and ---- in 2010.

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

If it were not for the automatic stabilizers in the U.S.economy,

According to a 2009 article in The Economist,the multiplier effect and crowding-out effect would exactly offset each other when the economy is

According to the IGM poll,what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

According to the IGM poll,what percentage of economists polled agreed that the benefits of ARRA exceeded the costs?

One of President Obama's first fiscal policy initiatives was

A tax cut targeted at ---- people may have a bigger effect because