Macroeconomic Policy Tools MCQs

Option A: Spending on public schools

Option B: Military spending

Option C: All of these answers are automatic stabilizers

Option D: spending on the space shuttle

Correct Answer: Unemployment benefits ✔

Option A: The aggregate supply curve shifts to the right by more than Rs 16 billion

Option B: The aggregate demand curve shifts to the left by more than Rs 16 billion

Option C: The aggregate demand curve shifts to the right by more than Rs 16 billion

Option D: the aggregate supply curve shifts to the left by more than Rs 16 billion

Correct Answer: The aggregate demand curve shifts to the right by more than Rs 16 billion ✔

Option A: supply-side economics

Option B: None of these answers

Option C: The crowding-out effect

Option D: The multiplier effects

Correct Answer: The crowding-out effect ✔

Option A: raises the value of the multiplier

Option B: has no impact on the value of the multiplier?

Option C: rarely occurs because the MPC is set by congressional legislation

Option D: lowers the value of the multiplier

Correct Answer: raises the value of the multiplier ✔

Option A: aggregate demand to the right

Option B: aggregate demand to the left

Option C: aggregate supply to the right

Option D: aggregate supply to the left

Correct Answer: aggregate demand to the right ✔

Option A: increase the interest rate

Option B: increase the price level

Option C: decrease the price level

Option D: decrease the interest rate

Correct Answer: increase the price level ✔

Option A: The wealth effect

Option B: None of these answers

Option C: The exchange-rate effect

Option D: The fiscal effect

Correct Answer: The interest-rate effect ✔

Option A: None of these answers

Option B: decrease the quantity demanded of money

Option C: increase the quantity demanded of money

Option D: decreases the demand for money

Correct Answer: decrease the quantity demanded of money ✔

Option A: The money supply shifts right prices fall spending increases and the aggregate demand curve shifts right

Option B: The money supply shifts right the interest rate rises investment decreases and the aggregate demand curve shifts left

Option C: The money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right

Option D: The money supply shifts right, prices rise, demand curve shifts left

Correct Answer: The money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right ✔

Option A: Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy

Option B: None of these answers are true

Option C: Long lags enhance the ability of policy makers to fine tune the economy

Option D: When policy makers implement activist stabilization policies there is a significant risk that their policies may actually have a destabilizing effect

Correct Answer: Long lags enhance the ability of policy makers to fine tune the economy ✔

Option A: The multiplier effects

Option B: supply side economics

Option C: None of these answers

Option D: The crowding out effect

Correct Answer: The multiplier effects ✔

Option A: Most economists believe that in the short run the greatest impact of a change in taxes is on aggregate supply, not aggregate demand

Option B: An increase in taxes shifts the aggregate demand curve to the right

Option C: A decrease in taxes shifts the aggregate supply curve to the left

Option D: A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.

Correct Answer: A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes. ✔

Option A: decrease government spending Which the shifts the aggregate demand curve to the left

Option B: decrease taxes, which shifts the aggregate demand curve to the right

Option C: decrease taxes, which shifts the aggregate demand curve to the left

Option D: decrease government spending which shifts the aggregate demand curve to the right

Correct Answer: decrease government spending Which the shifts the aggregate demand curve to the left ✔

Option A: 4

Option B: 7.5

Option C: 5

Option D: 0.75

Correct Answer: 4 ✔

Option A: Increase government spending and decrease taxes

Option B: decrease the money supply

Option C: decrease government spending and increase taxes

Option D: decrease interest rates

Correct Answer: decrease interest rates ✔

Option A: shift the aggregate supply curve to the right

Option B: shift the aggregate supply curve to the left

Option C: shift the aggregate demand curve to the left

Option D: shift the aggregate demand curve to the right

Correct Answer: shift the aggregate demand curve to the right ✔

Option A: shifts money demand to the right and increases the interest rate

Option B: None of these answers

Option C: shifts money demand to the right and decreases the interest rate

Option D: shifts money demand to the left and increases the interest rate

Correct Answer: shifts money demand to the right and increases the interest rate ✔

Option A: aggregate supply and aggregate demand

Option B: the supply and demand for loanable funds

Option C: the supply and demand for money

Option D: the supply and demand for labor

Correct Answer: the supply and demand for money ✔