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Page 1 1. The most appropriate countercyclical policy, or stabilization policy, in times of unemployment, according to Classical economists, is for the government to do which of the following? Decrease tax rates
Nothing
Raise taxes in the long-term
Increase the money supply
Increase government spending
2. If the supply of money decreases, what happens in the money market? Transaction demand for money rises.
The interest rate does not change.
The interest rate rises.
The interest rate falls.
3. According to supply-side economists, how are taxes and economic growth related? In times of accelerated economic contraction, higher taxes can help grow the economy.
The higher taxes are, the less economic growth there will be.
In times of accelerated economic growth, higher taxes can prevent the economy from overheating.
The higher taxes are, the more economic growth there will be.
4. What are the primary goals of fiscal and monetary policy? Maintain full employment, keep inflation under control, and drive economic growth.
Ensure 100% of people have jobs.
Maintain full employment and ensure everyone can get a loan.
Always keep tax rates low.
5. How do automatic stabilizers affect the government's budget during an economic recession? They result in deficits in the short term and surpluses in the long term.
They result in a balanced budget.
They result in a budget deficit.
They result in a budget surplus.
They result in deficits in the long term and surpluses in the short term.
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