Which of the following would be an appropriate discretionary fiscal policy to use when the economy is in a recession?
A. increased government spending
B. higher taxes
C. a balanced-budget reduction in both spending and taxes
D. an expansion in the money supply
Answer: A
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Spending on the war in Afghanistan is essentially categorized as government purchases. How do decreases in spending on the war in Afghanistan affect the aggregate demand curve?
A) They will shift the aggregate demand curve to the left. B) They will shift the aggregate demand curve to the right. C) They will move the economy up along a stationary aggregate demand curve. D) They will move the economy down along a stationary aggregate demand curve.
Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next
a. True b. False Indicate whether the statement is true or false