Question
(6)
Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward?
Raising taxes to increase the government surplus
Increasing government spending
Increasing the required reserve ratio
Imposing tariffs on foreign goods

  

  

  

(7)
In the short run, supply shocks cause prices to __________ and the quantity demanded to __________.
increase; increase
increase; decrease
decrease; increase
decrease; decrease

  

  

  

(8)
Good deflation is characterized by
an increase in supply at every price.
a decrease in supply at every price.
an increase in demand at every price.
a decrease in demand at every price.

  

  

  

(9)
The goal of Keynesian fiscal policy during a recession is to
do nothing – let the economy recover on its own.
move the economic equilibrium back to the full-employment level by increasing aggregate demand.
move the economic equilibrium back to the full-employment level by decreasing aggregate supply.
reduce long-run aggregate supply so that the economy can reach full employment without a long period of adjustment.

  

  

  

(10)
Assume that the government increases its spending by $100 million to stimulate demand. In the long run, the effect of this spending is to
increase output by more than $100 million.
increase output by $100 million.
raise prices.
increase unemployment.

  

  

  

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Answer #1

6.Increasing government spending

Explanation: This is an example of expansionary fiscal policy in which the economy is stimulating by increasing aggregate demand.

7. Increase, decrease

Explanation: In supply shock, there is a sudden fall in the supply of a certain good. It results in higher price and a lower quantity demanded.

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