Econ Chapter 9 Sample Equations

Which of the following is NOT a category of fiscal policy

Government policies regarding money supply in the economy

Which of the following is incorrect regarding tax revenues

They increase during recessions

During recessions, government spending usually

increases because unemployment payments increase

When a government runs a deficit

its debt increases

If the MPC is 0.75, the government spending multiplier is

4

What is the correct sequence of events during a recession

unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

The presence of automatic stabilizers means that the federal deficit is____ than it otherwise would be in a recession and______ than it otherwise would be in an expansion

larger; smaller

If the economy’s full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

Cyclical deficit

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output_____; and if taxes increase by $200, equilibrium output________

Increases by $1,0000; decreases by $800