Question

A $7.7 billion tax cut was accompnaied by a $9 billion increase in consumer spending in the same year." The most probable reason why consumer spending increased by more than taxes is that:
the tax cut induced more transfer payments which in turn caused consumer spending by others.
the tax cut reduced interest rates which in turn stimulated borrowing by others.
lower taxes required lower government spending which in turn encouraged private spending by others.
spending by those with higher take-home pay in turn generated additional production and spending by others.
Question 13

"Unemployment last month was 4.8 percent of the work force, a slight reduction from the previous month. For the past 15 months, unemployment has been under 5 percent of the work force. Consumer prices last month increased by two-tenths of a percent-a total gain of 2 percent over the level of one year ago. Total production of goods and services is projected to be 5 percent higher this year than last year."
Which of the following policies would be the most appropriate for short-run stabilization objectives?

passing new corporate tax incentives to encourage investment.
increasing both personal and corporate income taxes.
relying on automatic stabilizers.
increasing the minimum wage and expanding the number of jobs covered by these laws.
Question 14

Fiscal policy advisor Jones wants to increase aggregate demand while monetary policy advisor Smith wants to reduce aggregate demand. Which of the following combinations of fiscal and monetary policies would there two advisors suggest to achieve their conflicting goals.

tax decreases, open market sales of bonds by the Federal Reserve.
government spending decreases, an increase in the reserve requirements for commercial banks.
tax decreases, open market purchases of bonds by the Federal Reserve.
equal decreases in taxes and government spending; an increase in the Federal Reserve's discount rate.
Question 15

"I have promised to do everything in my power to reduce the federal deficit. That means reduced federal expenditures and, if necessary, increasing taxes. Under present conditions of full emplyment and steady prices, we can afford to bear the burden of this debt now instead of passing it on to our children and grandchildren."
If the policies of the Senator quoted above were adopted. what effect would be expected while these policies were being implimented?

higher inflation
higher rates of economic growth
increased unemployment and idle capacity
increased imports
Question 16

If rapid inflation occurs in a relatively full employment economy, well-coordinated monetary and fiscal policies would involve:

a government surplus, the purchase of securities in the open market , and a lower discount rate.
a government deficit, the sale of securities in the open market, and a higher discount rate.
a government surplus, the sale of securities in the open market , and a higher discount rate.
a government deficit, the purchase of securities in the open market , and a higher discount rate.

Answer 1

We will give them large amount of money