A fiscal policy action to close a recessionary gap is to:
A. increase taxes.
B. decrease the marginal propensity to consume.
C. decrease government purchases.
D. increase transfer payments.
Answer: D
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The primary indicator of the Fed's stance on monetary policy is
A) the discount rate. B) the federal funds rate. C) the growth rate of the monetary base. D) the growth rate of M2.
If the Fed focuses on price stability, the aggregate demand curve will be relatively ________, which shows that aggregate expenditure is ________ to changes in the inflation rate
A) flat; very sensitive B) flat; very insensitive C) steep; very sensitive D) steep; very insensitive
A tax ________ is more likely to cause a permanent increase in investment and worker productivity in an economy with a ________
A) increase; small government budget deficit B) decrease; large government budget deficit C) decrease; high inflation rate D) increase; large government budget deficit
Which of the following statements is TRUE?
A) A Cobb-Douglas production function can have different returns to scale at different output levels. B) It is impossible to have increasing returns to scale for one output level, and decreasing returns to scale for a different output level. C) It is possible to have increasing returns to scale for one output level, and decreasing returns to scale for a different output level. D) None of the above.