October 23, 2025 Claire B 0 Comments

If the government wishes to increase the level of real GDP, it might reduce:

A.

Taxes

B.

Transfer payments

C.

The size of the budget deficit

D.

Its purchases of goods and services

26.

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD2?

A.

An increase in taxes and an increase in government spending

B.

A decrease in taxes and an increase in government spending

C.

An increase in taxes and no change in government spending

D.

A decrease in taxes and a decrease in government spending

27.

Which combination of fiscal policy actions would most likely offset each other?

A.

Increase taxes and government spending

B.

Decrease taxes and increase government spending

C.

Increase taxes, but make no change in government spending

D.

Decrease government spending, but make no change in taxes

28.

Refer to the figure above. The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull inflation?

A.

Shift aggregate demand by increasing taxes

B.

Shift aggregate demand by decreasing taxes

C.

Shift aggregate supply by increasing taxes

D.

Shift aggregate demand by increasing government spending

29.

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a:

A.

Trade deficit

B.

Trade surplus

C.

Budget deficit

D.

Budget surplus

30.

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion; (2) investment = $40 billion; (3) government purchases = $90 billion; and (4) net export = $25 billion. If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

A.

Increase government spending and taxes

B.

Decrease government spending and taxes

C.

Decrease government spending and increase taxes

D.

Increase government spending and decrease taxes

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