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If taxation becomes more progressive, the built-in stability in the economy will decrease.

A) True
B) False

Correct Answer

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It is possible for an increase in government spending to encourage, instead of crowding out, private investment.

A) True
B) False

Correct Answer

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If the cyclically-adjusted budget deficit goes from 2% to 1% of GDP, then it indicates that fiscal policy has turned more contractionary.

A) True
B) False

Correct Answer

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The impact of an expansionary fiscal policy may be strengthened if it crowds out some private investment spending.

A) True
B) False

Correct Answer

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