QUESTION 36 2 points Save Ar In the Keynesian model, an increase in government s
ID: 1129802 • Letter: Q
Question
QUESTION 36 2 points Save Ar In the Keynesian model, an increase in government spending leads to an even larger increase in output because. of the multiplier effect. O it requires higher tax rates its budget must remain balanced. higher government debt is always associated with faster growth. QUESTION 37 2 points Save Ar If the income/spending multiplier is 2, then an initial S1 billon reduction in intended investment will result in.. a $500 million increase in income. O a S2 billion reduction in income a $3 billion reduction in income O None of the above QUESTION 38 2 points Save Ar es expansionary fiscal policy, but not enough to move the economy to the full Suppose an economy is currently in a recession. Assume the government then undertak employment level of output. Based on the AD AS model, what would we expect to be the most likely outcome of this policy in the short run? O An increase in output but little change in inflation A decrease in inflation and no change in output O An increase in inflation and no change in output A decrease in output but little change in inflation QUESTION 39 2 points Save Ar Which one of the following is an example of an expansionary fiscal policy? increasing government spending O increasing taxes. O decreasing transfer payments O printing money.Explanation / Answer
36) Option 1 is correct (multiplier effect leads to greater changes in output/income)
37) Option 2 is correct (Change in income = 2 x -1 = - $2 bn)
38) Option 1 is correct (AD shifts to the right, there is an increase in output but little change in inflation)
39) Option 1 is correct (increase in government spending is an example of expansionary fiscal policy)