Mod 17 Quiz

The modern tools of macroeconomic policy are:

• tax policy and antitrust policy.

• fiscal policy and monetary policy.

• monetary policy and exchange rate policy.

• capital policy and labor policy.

• fiscal policy and trade policy.

The aggregate demand curve:

• slopes downward.

• slopes upward.

• is horizontal at potential output.

• is vertical at potential output.

• is downward sloping during recessions and upward sloping during expansions.

According to the wealth effect, when the price level decreases, the purchasing power of assets:

• decreases and consumer spending decreases.

• increases and consumer spending decreases.

• decreases and consumer spending increases.

• remains constant and consumer spending is unchanged.

• increases and consumer spending increases.

An increase in government spending on health care is likely to shift the:

• short-run aggregate supply curve to the right.

• short-run aggregate supply curve to the left.

• long-run aggregate supply curve to the left.

• aggregate demand curve to the left.

• aggregate demand curve to the right.

If the government lowers taxes in response to a recession, the government is engaging in what economists call:

• monetary policy.

• investment policy.

• consumption policy.

• fiscal policy.

• foreign exchange policy.