AP Macroeconomics : The Multipliers and Fiscal Policy Quiz

Quiz
*Theme/Title:	The Multipliers and Fiscal Policy
* Description/Instructions
Fiscal policy is the use of government spending or taxes to stabilize the economy. In recessionary times, the government can lower taxes or increase spending. During times where output exceeds the full-employment output, the government can increase taxes or decrease spending. When the government uses expansionary fiscal policy, the hope is to move aggregate demand to the full employment output, or the natural rate of unemployment. During an inflationary period, the goal of fiscal policy is move the economy back to full employment. When using active fiscal policy, the government considers the spending multiplier. That is ΔG/(1-MPC), ΔI//(1-MPC), and ΔC//(1-MPC). If the government is worried about justifying new debt, the government can use equal amounts of spending and taxes. The tax multiplier which is, -MPC/MPS, computes how much a change in taxes affects spending. In addition to active fiscal policy, the government can use automatic stabilizers such as unemployment benefits to smooth out fluctuations in the business cycle.
Group:	AP Macroeconomics AP Macroeconomics Quizzes
Topic:	AP Macroeconomics

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