The government will have _____ flexibility in implementing countercyclical fiscal policy when the outstanding stock of government debt is _____ relative to the size of GDP. a.More; large. b.More; small. c.Less; insignificant. d.Total; large. e.Less; small. Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____. a.Increase; increase; return to its initial level; will be restored to potential output. b.Increase; increase; decrease; will be restored to potential output. c.Decrease; increase; return to its initial level; will be restored to potential output. d.Decrease; increase; decrease further; will be restored to potential output. e.Decrease; decrease; decrease further; will decrease further.
The government will have _____ flexibility in implementing countercyclical fiscal policy when the outstanding stock of government debt is _____ relative to the size of GDP. a.More; large. b.More; small. c.Less; insignificant. d.Total; large. e.Less; small. Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____. a.Increase; increase; return to its initial level; will be restored to potential output. b.Increase; increase; decrease; will be restored to potential output. c.Decrease; increase; return to its initial level; will be restored to potential output. d.Decrease; increase; decrease further; will be restored to potential output. e.Decrease; decrease; decrease further; will decrease further.
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 15P
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The government will have _____ flexibility in implementing countercyclical fiscal policy when the outstanding stock of government debt is _____ relative to the size of GDP .
a.More; large.
b.More; small.
c.Less; insignificant.
d.Total; large.
e.Less; small.
Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____.
a.Increase; increase; return to its initial level; will be restored to potential output.
b.Increase; increase; decrease; will be restored to potential output.
c.Decrease; increase; return to its initial level; will be restored to potential output.
d.Decrease; increase; decrease further; will be restored to potential output.
e.Decrease; decrease; decrease further; will decrease further.
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