Exam 11: Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Keynesian analysis stresses that a tax cut that increases the government's budget deficit (or reduces its budget surplus)

In the Keynesian aggregate expenditure model, the equilibrium level of income is achieved when

If fiscal policy is going to exert a stabilizing impact on the economy, it must be

The consumption function shows the relationship between

When an economy is operating well below its full-employment capacity and the marginal propensity to consume is 3/4, a $10 billion increase in investment will cause the equilibrium income to rise by

The main reason that the deficit grows in a recession is that

Which of the following is the best example of an automatic stabilizer?

In the midst of the Great Depression in 1932, Congress and the Hoover administration increased tax rates substantially. According to the Keynesian view, this tax increase was

According to the Keynesian model, which of the following policies would be most appropriate during a period of rapid inflation?

During normal times, the multiplier effect of an increase in government spending financed by taxes will be

According to the Keynesian model, in what ways will expansionary fiscal policy stimulate aggregate demand?

During normal times, if the marginal propensity to consumer is 3/4, and the government borrows $10 billion in order to increase spending by that amount, real output will expand by

Which of the following best illustrates the use of discretionary countercyclical fiscal policy?

A major advantage of built-in or automatic stabilizers is that they

Long lags make discretionary policy less effective because

When an economy dips into recession, automatic stabilizers will tend to

Within the framework of the Keynesian model, which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment?

If policy makers believe that an inflationary boom is about to begin, the Keynesian view indicates that they should

As the marginal propensity to consume (MPC) increases, the spending multiplier

Figure 11-4 What happens in the economy illustrated in Figure 11-4 if government purchases increase by the amount necessary to achieve full employment?