Quiz #547 answers

• 1. Government spending which is accompanied by a bond sale to the non-government sector adds less to aggregate spending than would be the case if there was no bond sale.

Answer: False

• 2. In the same way the spending multiplier indicates the extent to which GDP rises when there is a given rise in government spending, the tax multiplier captures the impact of rising tax rates on GDP as people reduce their labour supply because of the disincentives associated with taxation.

Answer: False

• 3. In a stock-flow consistent macroeconomics, we have to always trace the impact of flows during a period on the relevant stocks at the end of the period. Accordingly, government and private investment spending are two examples of flows that adds to the stock of aggregate demand which in turn impacts on GDP.

Answer: False