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econ 2301 Exam 3| Questions with 100% Solutions/Verified Answers
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econ 2301 Exam 3| Questions with 100%Solutions/Verified Answers
Which of the following factors that affect our well-being does GDP fail to adequately
account for? - ANSWER -changes in the quality of goods
-externalities
-leisure
-nonmarket transactions
Measures of well-being include: - ANSWER -life expectancy.
-infant mortality rates.
-literacy rates.
-pollution levels
The government's fiscal policy is its plan to regulate aggregate demand by manipulating -
ANSWER taxation and spending
If the government sought to end a recession, which of the following would be an
appropriate policy? - ANSWER Decrease taxes and increase transfer payments.
Which of the following combinations of changes would have a contractionary effect on
aggregate demand? - ANSWER An increase in taxes and a decrease in government purchases
The main components of spending, which can cause changes in aggregate demand, are: -
ANSWER consumption, investment, government purchases, and net exports.
, Assume that the government is considering plans to increase aggregate demand in order
to reduce unemployment. Which of the following would be effective? - ANSWER -Increase
government purchases of goods and services.
-Decrease taxes.
-Increase transfer payments.
The largest single source of revenue for the federal government is the: - ANSWER personal
income tax.
If unemployment is the most significant problem in the economy, which of the following actions
would be an appropriate fiscal policy response? - ANSWER -decrease taxes
-increase government purchases
How does a change in income taxes primarily affect aggregate demand? - ANSWER An income
tax change alters disposable income and consumption spending.
To offset the effect of a steep fall in net exports on the economy, the government might -
ANSWER increase government purchases.
Expansionary fiscal policy, other things being equal, will tend to: - ANSWER
decrease unemployment rates
The most important automatic stabilizer (The one with the biggest impact on the economy) is: -
ANSWER The tax system
When the economy goes into a ____, the amount of unemployment compensation and welfare
payments ____ automatically. - ANSWER recession; increase
Automatic stabilizers in the United States are: - ANSWER changes in government transfer
payments and tax revenues that vary automatically and inversely to business cycle changes.
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