MCQs also short answers for fiscal policy.

1. For various reasons, fiscal policy changes automatically then output also employment fluctuate.

1. Elucidate why tax revenue changes whenever the economy goes into a recession.

2. Elucidate why government spending changes whenever the economy goes into a recession.

3. If the government were to operate under as strict balanced-budget rule, illustrate what would it have to do in a recession? Would which make the recession more or less severe?

2. Expansionary fiscal policy consists of:

1. Increased government purchases, increased taxes, and increased transfer payments.

2. Decreased government purchases, decreased taxes, and decreased transfer payments.

3. Increased government purchases, increased taxes, and decreased transfer payments.

4. Increased government purchases, decreased taxes, and increased transfer payments.

3. A sales or excise tax is often considered to be unfair to which group of citizens?

1. no one in particular, because it is a proportional tax which treats everyone the same

2. lower income groups who pay a greater percentage of their income toward the tax than do the wealthy

3. the middle class because they comprise the largest demographic group in society

4. upper income people because they have more income

4. Starting at full employment, if MPC = 2/3, an increase in government purchases of $10 billion would lead AD to ____ also ____ real output in the long run.

1. increase $30 billion; increase

2. increase $30 billion; not change

3. decrease $30 billion; decrease

4. decrease $30 billion; not change

5. None of the above.