Question

Probleme scal D ashboard Practice Proble Best Apple Wat. Home Chego- Macroeconom Flipt Extra C MYFAU 1) in an AD/AS model, if the economy is below its long-run output, what will happen if the government uses fiscal policy to bring the economy back to long-run equilibrium a) AD will shift left AD will shift right C) SRAS will shift left d) SRAS will shift right Submit 2) Which of the following is an example of expansionary fiscal policy! a) A new taxon Moline CbAn increase in the federal funds interest rate c) A new subsidy for college tuition expenses d) An increase in the money supply Submit Which of the following has the largest spending multiplier! a) Increased government spending bi Tax cuts Subsidy reductions Higher property taxes 4) What is a potential problem with using fiscal policy! Policies de always implemented too fast bi Paradox of Thrift directly impacts the money wply Crowding Out Effect

Answer 1

1. B
(With fiscal policy, AD will shift to the right so that output rises to its long run level.)

2. C
(Expansionary fiscal policy means increase in government expenditure by increase in subsidies.)

3. A
(Increased government spending will lead to highest multiplier.)

4. D
(Crowding out effect is a problem with fiscal policy.)