1. At equilibruim GDP:
a. savings = investment, but aggregate demand does not equal aggregate supply.
b. savings = investment, and aggregate demand = aggregate supply.
c. savings does not equal investment,and aggregate demand does not equal aggregate supply.
d. savings does not equal investment, but aggregate demand = aggregate supply.
2. Each of the following supports the classical theory of employment EXCEPT:
a. say’s law.
b. wage-price flexibility.
c. the interest mechanism.
d. government spending programs.
3. An illustration of the term “automatic stablizer: is provided by:
a. the tendency of tax collections to rise as the economy moves into a recession.
b. the tendency of tax collections fall as the economy moves into a recession.
c. increases in tax rates as the economy moves into a recession.
4. The mulitplier effect occurs because:
a. as savings level increase, a greater pool of loanable funds is available for investment spending by business.
b. increases in income cause a chain reaction of spending by many business and individuals.
c. increases in income cause tax revenues to increase, thereby stimulating increases in government spending levels.
d. business copy the spending decisions of their competitors.
5. Which of the following is NOT an example of a fiscal policy lag?