The Use of Government Purchases (G)as a Fiscal Policy Tool

question 44

Multiple Choice

The use of government purchases (G) as a fiscal policy tool can have an effect on long-run growth in the economy.Under what circumstances might an increase in G cause the level of potential output ( ) to increase?

• A)If the increase in G crowds out private investment.
• B)If the increase in G causes a permanent increase in the marginal propensity to consume,which causes a permanent rightward shift of the AD curve.
• C)If the increase in G is spent on public infrastructure that increases the productivity of private-sector production.
• D)If the increase in G leads to a permanent increase in the level of autonomous saving in the economy.
• E)If the increase in G is offset by an equal decrease in C,I,and NX.

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Definitions:

Anecdotally

Referring to information that is provided through personal stories or observations rather than through scientific analysis or hard evidence.

Sample Frame

The list or database from which a sample is drawn for research or statistical analysis, representing the population of interest.

Population

The total number of individuals within a specified area or group, often used in statistics and research.

Sample

A subset of a population selected for measurement, observation, or questioning to provide statistical information about the population.