Question Details

Which of the following will tend to increase the size of "the" multiplier 



1. Which of the following will tend to increase the size of "the" multiplier ? 
a) a higher marginal tax rate b) a higher marginal propensity to import 
c) a higher marginal propensity to consume d) a higher level of government spending 
2. If you know that investment is quite volatile and you would prefer to see the economy with smaller rather than larger swings in economic activity, then 
a) you would prefer a large MPC b) you would prefer a small MPC 
c) the value of the MPC is not relevant because the problem is investment behavior 
d) the value of the MPC is not relevant because policy authorities can smooth out cycles with appropriate policy action 
3. A conservative who was concerned with the growth in government but who believed in the Keynesian concept of demand management would most likely support which of the following expansionary policies 
a) a decrease in taxes b) an increase in taxes 
c) a decrease in government spending d) an increase in government spending 
4. Suppose that in a period of sluggish growth, there is a debate on whether to stimulate the economy by means of a tax cut or an increase in government spending. In the short run, a tax cut, as contrasted with an increase in government spending, is 
a) equally powerful on a per dollar basis, favoring private over public spending 
b) not quite as powerful on a per dollar basis, favoring private over public spending 
c) equally powerful on a per dollar basis, and neutral between private and public spending 
d) not quite as powerful on a per dollar basis, and neutral between private and public spending 
5. A stimulating dose of fiscal policy can be applied either by increasing government spending or by decreasing taxes. For most people the main reason for preferring one to the other is 
a) a belief that one is easier to do than the other 
b) a belief that one is faster to enact than the other 
c) a belief that one has a larger multiplier effect than the other 
d) a subjective preference for larger or smaller government activity



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