1. Which of the following would shift the aggregate demand curve to the right?
- An increase in interest rates
- An increase in input prices
- An increase in government spending
- An increase in taxes
2. Fiscal policy refers to the
- adjustment of government spending and taxes in order to achieve certain national economic goals.
- adjustment of national income data to account for price level changes.
- manipulation of the money supply in order to increase the amount of paper currency in circulation.
- changing way that unemployment data is calculated so as to make it appear that unemployment is lower than it actually is.
3. If the economy is experiencing an inflationary gap and the government wants to accelerate the adjustment to the long-run equilibrium, it should
- reduce aggregate demand by increasing government spending or cutting taxes.
- increase aggregate supply by cutting government spending or raising taxes.
- reduce aggregate demand by cutting government spending or raising taxes.
- increase aggregate supply by increasing government spending or lowering taxes.
4. Refer to the above figure. If the relevant aggregate demand curve is AD2, what is the current economic situation?
- Inflationary gap
- Equilibrium
- Overemployment
- Recessionary gap
5. Supply-side economics focuses on tax cuts to stimulate
- government spending.
- military research.
- aggregate demand by reducing saving.
- aggregate supply by increasing production.