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1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....

1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in ta

1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes the aggregate expenditures function steeper, and lowers the size of the multiplier b. makes the aggregate expenditures function steeper, and raises the size of the multiplier c. makes the aggregate expenditures function flatter, and lowers the size of the multiplier d. makes the aggregate expenditures function flatter, and raises the size of the multiplier e. lowers aggregate expenditures, but has no effect on the size of the multiplier 3. An illustration of the term "automatic stabilizer" is provided by: a. the tendency of tax collections to rise as the economy moves into a recession b. the tendency of tax collections to fall as the economy moves into a recession c. increases in tax rates as the economy moves into a recession d. decreases in tax rates as the economy moves into a recession e. public works designed to get the economy out of a depression 4. The full-employment budget will be in: a. surplus, if the economy is below full employment and the actual budget is balanced b. deficit, if the economy is below full employment and the actual budget is balanced c. deficit, whenever the economy is below full employment d. surplus, whenever the economy is below full employment e. we don't have enough information; any one of the above statements may be correct
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1. An increase in taxes and/or decrease in government spending.

2. Makes the aggregate expenditures function flatter and lowers the size of multiplier.

3. The tendency of tax collection to fall as the economy moves into a recession.

4. Deficit, if the economy is below full employment and the actual budget is balanced.

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