An increase in government expenditure shifts the AD curve ________ and an increase in taxes shifts the AD curve ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward
63) Suppose the government of Japan increases its expenditure on goods and services. In the short run, this increase will
A) shift the AD curve in Japan rightward.
B) shift the AD curve in Japan leftward.
C) cause the price level in Japan to fall.
D) None of the above answers is correct.
64) If the government wants to engage in fiscal policy to increase real GDP, it could
A) increase government expenditure in order to increase short-run aggregate supply.
B) decrease government expenditure in order to increase short-run aggregate supply.
C) increase government expenditure in order to increase aggregate demand.
D) decrease government expenditure in order to decrease aggregate demand.
65) If real GDP is less than potential GDP, which of the following fiscal policies would increase real GDP?
A) only a decrease government expenditure
B) only an increase taxes
C) increase government expenditure and/or decrease taxes
D) decrease government expenditure and/or increase taxes
66) Using the AD-AS model, an increase in government expenditure
A) has no impact on real GDP.
B) has no impact on real GDP, but will increase potential GDP.
C) increases both real GDP and the price level.
D) has a full multiplier effect on real GDP, leaving the price level unchanged in the long run.
67) Using fiscal policy, to increase real GDP and employment the government could ________ government expenditure on goods and services or ________ taxes.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
68) When real GDP is less than potential GDP, an increase in government expenditures will ________ real GDP and ________ the price level.
A) increase; raise
B) increase; lower
C) decrease; raise
D) decrease; lower
69) Suppose the economy is at a short-run equilibrium with real GDP greater than potential GDP. Which of the following fiscal policies would decrease real GDP and the price level?
A) an increase in government expenditure
B) a decrease in taxes
C) an increase in taxes
D) None of the above answers is correct.
70) Suppose real GDP exceeds potential real GDP. If the government decreases its expenditures on goods and services, then real GDP ________ and the price level ________.
A) decreases; rises
B) increases; falls
C) decreases; falls
D) increases; rises
71) Suppose that the government decreases its expenditures on goods and services. Within the AS-AD model, the result will be ________ in real GDP and ________ in the price level.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
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