Question Details

Which of the following should lead to a rise in economic activity 



1. According to Keynesian theory, how will increasing government spending when unemployment is 10% have a different effect from a similar increase when unemployment is 5%? 
a) At 10%, it is more likely to increase prices than real output. 
b) At 5%, it is more likely to increase real output than prices. 
c) At 10% it is more likely that it will require a sacrifice of private goods. 
d) At 5% it is more likely that it will require a sacrifice of private goods. 
2. "The" multiplier is higher if 
a) the MPC is lower b) the tax rate is higher 
c) spending is less sensitive to the interest rate 
d) spending is more sensitive to the interest rate 
3. Crowding out causes "the" multiplier to 
a) become larger b) become smaller c) become unstable d) remain unchanged 
4. Which of the following should lead to a rise in economic activity ? 
a) a decrease in inventories b) a decrease in consumption 
c) an increase in the interest rate d) an increase in the marginal tax rate 
5. Suppose there is a tax increase. Because during the economy's reaction to this the interest rate becomes 
a) higher, the decrease in GDP is larger than if the interest rate had not changed 
b) higher, the decrease in GDP is smaller than if the interest rate had not changed 
c) lower, the decrease in GDP is larger than if the interest rate had not changed 
d) lower, the decrease in GDP is smaller than if the interest rate had not changed



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