Question 1

A decrease in the income tax rate would imply the following:

Accepted Answer

A) a decrease in saving 
B) a decrease in government spending 
C) a decrease in government transfer payments 
D) an increase in the expenditure multiplier 
E) all of the above 
A) a decrease in saving 
B) a decrease in government spending 
C) a decrease in government transfer payments 
D) an increase in the expenditure multiplier 
E) all of the above

Question 2

When calculating the multiplier for government purchases (G), we

Accepted Answer

A) must know the marginal propensity to save (mps) 
B) must know the income tax rate (t) 
C) must know the average propensity to consume (apc) 
D) can ignore the size of the marginal propensity to consume (mpc) 
E) both 
A) and 
B)  
A) must know the marginal propensity to save (mps) 
B) must know the income tax rate (t) 
C) must know the average propensity to consume (apc) 
D) can ignore the size of the marginal propensity to consume (mpc) 
E) both 
A) and 
B)

Question 3

Which of the following will NOT happen if the income tax rate (t) is increased?

Accepted Answer

A) the expenditure multiplier and consumption will both decrease 
B) disposable income, saving, and consumption will all decrease 
C) consumption and income both will decrease, but saving will increase 
D) the full-employment budget surplus will increase 
E) autonomous spending will stay the same but national income will decrease 
A) the expenditure multiplier and consumption will both decrease 
B) disposable income, saving, and consumption will all decrease 
C) consumption and income both will decrease, but saving will increase 
D) the full-employment budget surplus will increase 
E) autonomous spending will stay the same but national income will decrease

Question 4

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If autonomous saving decreases by 300, which of the following is true?

Accepted Answer

A) total consumption will increase by 300 
B) national income will increase by 500 
C) disposable income will increase by 750 
D) the budget surplus will increase by 250 
E) the budget surplus will be unaffected 
A) total consumption will increase by 300 
B) national income will increase by 500 
C) disposable income will increase by 750 
D) the budget surplus will increase by 250 
E) the budget surplus will be unaffected

Question 5

A decrease in the income tax rate (t) will

Accepted Answer

A) increase the full-employment budget surplus 
B) increase the size of the expenditure multiplier 
C) increase disposable income and autonomous spending 
D) increase consumption but decrease saving 
E) none of the above 
A) increase the full-employment budget surplus 
B) increase the size of the expenditure multiplier 
C) increase disposable income and autonomous spending 
D) increase consumption but decrease saving 
E) none of the above

Question 6

The full-employment budget surplus increases if

Accepted Answer

A) government transfer payments decrease 
B) welfare spending increases 
C) defense spending increases 
D) the economy goes into a recession 
E) the economy goes into a boom 
A) government transfer payments decrease 
B) welfare spending increases 
C) defense spending increases 
D) the economy goes into a recession 
E) the economy goes into a boom

Question 7

A consumption function of the form C = Co + cYD has a positive vertical intercept Co, which indicates that

Accepted Answer

A) some consumption is unaffected by changes in disposable income 
B) the mpc will increase as disposable income increases 
C) the apc will always increase as disposable income increases 
D) the apc will always be less than the mpc 
E) all of the above 
A) some consumption is unaffected by changes in disposable income 
B) the mpc will increase as disposable income increases 
C) the apc will always increase as disposable income increases 
D) the apc will always be less than the mpc 
E) all of the above

Question 8

Assume a model with income taxes in which imports increase proportionally to national income. Which of the following is FALSE?

Accepted Answer

A)   	the expenditure multiplier will increase with an increase in the marginal propensity to import 
B) 	the expenditure multiplier will increase with a decrease in the marginal propensity to save 
C) 	the expenditure multiplier will decrease with an increase in the marginal propensity to save 
D)   	the expenditure multiplier will decrease with an increase in the marginal income tax rate 
E)   	the expenditure multiplier will decrease with an increase in the marginal propensity to import 
A)   	the expenditure multiplier will increase with an increase in the marginal propensity to import 
B) 	the expenditure multiplier will increase with a decrease in the marginal propensity to save 
C) 	the expenditure multiplier will decrease with an increase in the marginal propensity to save 
D)   	the expenditure multiplier will decrease with an increase in the marginal income tax rate 
E)   	the expenditure multiplier will decrease with an increase in the marginal propensity to import

Question 9

In a simple model with no government or foreign sector, a decline in investment of $10 billion will lead to a $50 billion decline in the equilibrium level of income if

Accepted Answer

A) the mps is 0.2 
B) the mpc is 0.5 
C) the ratio of total consumption to total income is 0.8 
D) changes in consumption divided by changes in income equal 0.2 
E) changes in saving divided by changes in income equal 0.8 
A) the mps is 0.2 
B) the mpc is 0.5 
C) the ratio of total consumption to total income is 0.8 
D) changes in consumption divided by changes in income equal 0.2 
E) changes in saving divided by changes in income equal 0.8

Question 10

An increase in government spending will

Accepted Answer

A) not affect aggregate demand unless it is debt-financed 
B)  not affect aggregate demand if it is financed by a tax increase of equal magnitude 
C) decrease aggregate demand if it is financed by a tax increase of equal magnitude 
D) stimulate aggregate demand by less than a tax decrease of equal magnitude 
E) none of the above 
A) not affect aggregate demand unless it is debt-financed 
B)  not affect aggregate demand if it is financed by a tax increase of equal magnitude 
C) decrease aggregate demand if it is financed by a tax increase of equal magnitude 
D) stimulate aggregate demand by less than a tax decrease of equal magnitude 
E) none of the above

A decrease in the income tax rate would imply the following:

When calculating the multiplier for government purchases (G), we

Which of the following will NOT happen if the income tax rate (t) is increased?

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If autonomous saving decreases by 300, which of the following is true?

A decrease in the income tax rate (t) will

The full-employment budget surplus increases if

A consumption function of the form C = Co + cYD has a positive vertical intercept Co, which indicates that

Assume a model with income taxes in which imports increase proportionally to national income. Which of the following is FALSE?

In a simple model with no government or foreign sector, a decline in investment of $10 billion will lead to a $50 billion decline in the equilibrium level of income if

An increase in government spending will

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters

Exam 10: Income and spending

A decrease in the income tax rate would imply the following:

When calculating the multiplier for government purchases (G), we

Which of the following will NOT happen if the income tax rate (t) is increased?

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If autonomous saving decreases by 300, which of the following is true?

A decrease in the income tax rate (t) will

The full-employment budget surplus increases if

A consumption function of the form C = Co + cYD has a positive vertical intercept Co, which indicates that

Assume a model with income taxes in which imports increase proportionally to national income. Which of the following is FALSE?

In a simple model with no government or foreign sector, a decline in investment of $10 billion will lead to a $50 billion decline in the equilibrium level of income if

An increase in government spending will

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters