Mainstream Macroeconomics Would Suggest That Fiscal Policy

question 8

Multiple Choice

Mainstream macroeconomics would suggest that fiscal policy:

• A) Affects GDP and the price level through changes in aggregate supply
• B) Changes aggregate demand and GDP through the multiplier process
• C) Has no effect unless the fiscal policy is accompanied by changes in the money supply
• D) Is relatively ineffective because the outcomes are anticipated and offset

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Definitions:

National Income

National Income is the total value of all goods and services produced by a country's economy over a specific time period, plus income from abroad, minus income remittances to other countries.

GDP

Gross Domestic Product, it measures the total economic output of a country, representing the market value of all goods and services produced over a specific time period.

Per Capita

A statistical measure that divides an aggregate by the number of individuals in the population, commonly used to express economic indicators.

Household Production

The creation of goods and services within a home for the use by its members, which replaces or supplements the purchase of products and services from the market.