- If the economy is in a severe recession, which of the following measures is most appropriate?
A. An increase in government spending
B. A decrease in government spending
C. An increase in personal income taxes
D. A decrease in welfare payments
E. A decrease in transfer payments - The long-run aggregate supply curve is likely to shift to the right when what occurs?
A. An increase in the cost of productive resources
B. An increase in productivity
C. An increase in the federal budget deficit
D. A decrease in the money supply
E. A decrease in the labor force - Which of the following is a basic premise for Classical economists?
A. Saving is greater than investment.
B. The economy is self-correcting to full employment.
C. The economy may be at equilibrium below full-employment.
D. Inflation is not a serious economic problem.
E. The prices of products tend to be too high. - Which of the following will most likely result from a decrease in government spending?
A. An increase in output
B. An increase in the price level
C. An increase in employment
D. A decrease in aggregate supply
E. A decrease in aggregate demand - If a large increase in total spending has no effect on GDP, it must be true that:
A. Only the price level is rising.
B. The economy is experiencing high unemployment.
C. The spending multiplier is equal to 1.
D. The economy is in short-run equilibrium.
E. Aggregate supply has increased. - Which of the following would increase the value of the multiplier?
A. An increase in the government’s expenditures
B. An increase in exports
C. A decrease in government employment benefits
D. A decrease in the marginal propensity to consume
E. A decrease in the marginal propensity to save - Which of the following policies is most likely to encourage long-run economic growth in a country?
A. A restriction on high-technology products
B. A decline in the number of immigrants to the country
C. A decrease in government transfer payments
D. An increase in the savings rate
E. An increase in defense spending
Part II: Macroeconomics