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Economics

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1.         People decide to save 25 percent of their incomes. The value of the marginal propensity to consume is ________ and the value of the spending multiplier is ________.

a.         0.25; 4                                     d.         0.75; 4

b.         0.75; 25 percent                      e.         0.75; 2 percent

c.         0.25; 1.25

2.         When aggregate demand is low to drive real GDP below full-employment output,

a.         there is downward pressure on the price level, and the government may want to conduct contractionary fiscal policy.

b.         the economy is slipping into a recession, and the government may want to conduct expansionary fiscal policy.

c.         there is upward pressure on the price level, and the government may want to conduct contractionary fiscal policy.

d.         there is upward pressure on the price level, and the government may want to conduct expansionary fiscal policy.

3.         Contractionary fiscal policy occurs when the ________ to control inflation.

a.         government decreases spending or increases taxes

b.         government decreases spending or decreases taxes

c.         government increases spending or increases taxes

d.         government increases spending or decreases taxes

e.         Federal Reserve increases money supply