Question 1

If AD excess equals $40 billion and the MPC equals 0.75,then the desired fiscal restraint equals

Accepted Answer

A) $10 billion. 
B) $53.33 billion. 
C) $30 billion. 
D) $160 billion. 
A) $10 billion. 
B) $53.33 billion. 
C) $30 billion. 
D) $160 billion.

Question 2

Assume the MPC is 0.80.If the government wants to eliminate an AD shortfall of $300 billion,it should

Accepted Answer

A) Cut taxes by $75 billion. 
B) Cut taxes by $240 billion. 
C) Increase taxes by $60 billion. 
D) Cut taxes by $60 billion. 
A) Cut taxes by $75 billion. 
B) Cut taxes by $240 billion. 
C) Increase taxes by $60 billion. 
D) Cut taxes by $60 billion.

Question 3

Crowding out is caused by

Accepted Answer

A) An increase in consumer spending. 
B) A decline in overall spending. 
C) An increase in government borrowing. 
D) A decline in tax revenues. 
A) An increase in consumer spending. 
B) A decline in overall spending. 
C) An increase in government borrowing. 
D) A decline in tax revenues.

Question 4

To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75,the government should decrease taxes by

Accepted Answer

A) $400 billion. 
B) $120 billion. 
C) $30 billion. 
D) $40 billion. 
A) $400 billion. 
B) $120 billion. 
C) $30 billion. 
D) $40 billion.

Question 5

Prior to 1913,most of the federal government's tax revenues came from

Accepted Answer

A) Social Security payroll taxes. 
B) Customs,whiskey,and tobacco taxes. 
C) Individual income taxes. 
D) Corporate income taxes. 
A) Social Security payroll taxes. 
B) Customs,whiskey,and tobacco taxes. 
C) Individual income taxes. 
D) Corporate income taxes.

Question 6

Refer to Figure 11.1.Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion.The economy confronts a real GDP gap of

Accepted Answer

A) $.2 trillion. 
B) $.4 trillion. 
C) $.6 trillion. 
D) None of the choices are correct. 
A) $.2 trillion. 
B) $.4 trillion. 
C) $.6 trillion. 
D) None of the choices are correct.

Question 7

If the MPC for an economy is 0.90,a $4 billion increase in taxes will ultimately cause consumption to decrease by

Accepted Answer

A) $40 billion. 
B) $36 billion. 
C) $4.4 billion. 
D) $3.6 billion. 
A) $40 billion. 
B) $36 billion. 
C) $4.4 billion. 
D) $3.6 billion.

Question 8

The general formula for computing the desired stimulus is

Accepted Answer

A) AD shortfall - the multiplier. 
B) AD shortfall + the multiplier. 
C) AD shortfall × the multiplier. 
D) AD shortfall ÷ the multiplier. 
A) AD shortfall - the multiplier. 
B) AD shortfall + the multiplier. 
C) AD shortfall × the multiplier. 
D) AD shortfall ÷ the multiplier.

Question 9

AD excess is the amount of additional aggregate demand needed to achieve full employment after allowing for price level changes.

Accepted Answer

A) True 
 B)False

Question 10

Income transfers are current payments to individuals for which no current goods or services are exchanged.

Accepted Answer

A) True 
 B)False

Question 11

Refer to Figure 11.1.Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion.The AD shortfall is equal to

Accepted Answer

A) $0.2 trillion. 
B) $0.4 trillion. 
C) $0.6 trillion. 
D) None of the choices are correct. 
A) $0.2 trillion. 
B) $0.4 trillion. 
C) $0.6 trillion. 
D) None of the choices are correct.

Exam 11: Fiscal Policy

If AD excess equals $40 billion and the MPC equals 0.75,then the desired fiscal restraint equals

Assume the MPC is 0.80.If the government wants to eliminate an AD shortfall of $300 billion,it should

Crowding out is caused by

To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75,the government should decrease taxes by

Prior to 1913,most of the federal government's tax revenues came from

Refer to Figure 11.1.Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion.The economy confronts a real GDP gap of

If the MPC for an economy is 0.90,a $4 billion increase in taxes will ultimately cause consumption to decrease by

The general formula for computing the desired stimulus is

AD excess is the amount of additional aggregate demand needed to achieve full employment after allowing for price level changes.

Income transfers are current payments to individuals for which no current goods or services are exchanged.

Refer to Figure 11.1.Assume aggregate demand is represented by AD1 and full-employment output is $6.0 trillion.The AD shortfall is equal to

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

Refer to Figure 11.1.Assume aggregate demand is represented by AD₁ and full-employment output is $6.0 trillion.The economy confronts a real GDP gap of

Refer to Figure 11.1.Assume aggregate demand is represented by AD₁ and full-employment output is $6.0 trillion.The AD shortfall is equal to