Quiz #433

• 1. In terms of the initial impact on national income, a tax increase which aims to increase tax revenue at the current level of national income by $x is less damaging than a spending cut of $x?
• False
• True
• 2. If private households increase their saving from disposable income and firms reduce their investment expenditure, then the government has to expand its fiscal deficit to avoid employment losses.
• False
• True
• 3. During a recession, a government has to use expansionary fiscal policy to restore trend real GDP growth if it wants to reduce unemployment.
• False
• True

Quiz #433 answers

• 1. In terms of the initial impact on national income, a tax increase which aims to increase tax revenue at the current level of national income by $x is less damaging than a spending cut of $x?

Answer: True

• 2. If private households increase their saving from disposable income and firms reduce their investment expenditure, then the government has to expand its fiscal deficit to avoid employment losses.

Answer: False

• 3. During a recession, a government has to use expansionary fiscal policy to restore trend real GDP growth if it wants to reduce unemployment.

Answer: False