A) the tendency of increases in government expenditures to expand private sector output by an even larger amount.
B) the possibility that demand stimulus programs will direct resources toward unproductive projects and areas of full employment.
C) the possibility that borrowing to finance current spending will lead to lower future interest rates.
D) the reluctance of Congress to approve increases in government spending during a recession.
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A) highly appropriate because it will stimulate aggregate demand and,thereby,help to strengthen the economy.
B) highly inappropriate because it will exert a restrictive impact on aggregate demand,output,and employment.
C) not very important because the "demand stimulus effects" of the tax cut will be largely offset by additional borrowing and higher interest rates.
D) not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future.
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A) cause real interest rates to rise,which will decrease aggregate demand,output,and employment.
B) lead to an expansion in spending,which will stimulate both real output and employment.
C) fail to stimulate aggregate demand because people will save more in order to pay the higher future taxes implied by the expansion in government debt.
D) lead to inflation because the deficits expand the money supply.
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A) budget deficits more attractive than budget surpluses.
B) budget surpluses more attractive than budget deficits.
C) budget deficits attractive during an economic boom,but surpluses attractive during a recession.
D) tax increases more attractive than increases in government spending.
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A) an increase in aggregate supply during that decade.
B) weak aggregate demand and a continuation of recessionary conditions.
C) an increase in aggregate demand and real output.
D) higher interest rates and taxes that will retard future growth.
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A) expanded and real government spending increased rapidly,indicating that fiscal policy was restrictive.
B) expanded and real government spending increased rapidly,indicating that fiscal policy was expansionary.
C) declined and real government spending fell,indicating that fiscal policy was restrictive.
D) declined and real government spending fell,indicating that fiscal policy was expansionary.
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The most direct way that high tax rates ...View Answer
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A) higher interest rates and lower private investment under the crowding-out view.
B) an increase in aggregate demand under the Keynesian view.
C) no change in aggregate demand under the new classical view.
D) all of the above.
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A) budget surplus will be highly effective against inflation.
B) budget deficit is likely to stimulate aggregate demand and cause inflation.
C) budget deficit will increase real interest rates and,thereby,retard private spending.
D) budget surplus will retard aggregate demand and throw the economy into a downward spiral.
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A) lower interest rates and tax rates that will enhance economic growth.
B) higher interest rates and tax rates that will slow economic growth.
C) increases in aggregate demand that will lead to strong economic growth.
D) high rates of future inflation.
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A) an increase in government expenditures to provide subsidies for large banks that made bad investment decisions
B) an increase in government expenditures that changes the composition of aggregate demand
C) a reduction in tax rates
D) an increase in payments to unemployed workers financed by borrowing
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