Question Details

How many of them could virtually double public spending without raising taxes



1. “Keynesian theory says stimulate by lowering taxes. But what do you think a typical worker, given a thousand-dollar tax break during a major recession, will likely do with it?” The best answer to this rhetorical question is 
a)	divide it equally between spending and saving 
b)	spend most of it and save the rest 
c)	save most of it and spend the rest 
d)	use it as a down payment on a house 

2. “In a recent interview the central bank Governor said that the paring back of inventories should ..…” This clipping is best completed with 
a)	Worsen the recession but lead eventually to an economic recovery 
b)	Worsen the recession and kill any future recovery 
c)	Push us out of recession and maintain an economic recovery 
d)	Push us out of recession temporarily but lead eventually to a long-term recession. 

3. “Businesses are quickly moving to cut inventory levels, a key development.” Cutting inventory levels will 28 

a)	Push the economy toward recession. 
b)	Stimulate the economy. 
c)	Complement fiscal policy. 
d)	Make firms more efficient 

4. “On the face of it, Zimbabwe- finance minister should be the envy of his counterparts around the world. How many of them could virtually double public spending without raising taxes?” This happened because the higher spending was financed by 
a)	printing money 
b)	foreign direct investment 
c)	foreign aid 
d)	an increase in the tax base 

5. “The White House recently said that without the tax cuts in 2001 and 2003, there would currently be 1.5m fewer jobs in the US.” The logic for this claim is that a multiplier process increased employment because the tax cuts 
a)	increased consumer and investment spending 
b)	financed an increase government spending 
c)	decreased consumer and investment spending 
d)	forced a decrease in government spending 



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