Question 1

The unique feature of a progressive income tax is that the higher one's income (up to some point),the __________ one pays.

Accepted Answer

A)  more taxes 
B)  higher the tax rate 
C)  less taxes 
D)  lower the tax rate 
E)  none of the above 
A)  more taxes 
B)  higher the tax rate 
C)  less taxes 
D)  lower the tax rate 
E)  none of the above

Question 2

Define the term budget deficit (as it applies to the federal government)and describe the difference between a cyclical deficit and a structural deficit. Provide a hypothetical numerical example to help support your answer.

Accepted Answer

A federal budget deficit occurs when gov

Question 3

An example of expansionary fiscal policy is

Accepted Answer

A)  an increase in government spending, or an increase in taxes, or both. 
B)  a decrease in government spending, or a decrease in taxes, or both. 
C)  an increase in government spending, or a decrease in taxes, or both. 
D)  a decrease in government spending, or an increase in taxes, or both. 
E)  holding government spending constant while increasing taxes. 
A)  an increase in government spending, or an increase in taxes, or both. 
B)  a decrease in government spending, or a decrease in taxes, or both. 
C)  an increase in government spending, or a decrease in taxes, or both. 
D)  a decrease in government spending, or an increase in taxes, or both. 
E)  holding government spending constant while increasing taxes.

Question 4

Exhibit 11-2
  
-Refer to Exhibit 11-2.At point B,if we cut tax rates slightly,tax revenues

Accepted Answer

A)  increase. 
B)  decrease. 
C)  will not change. 
D)  drop to zero. 
A)  increase. 
B)  decrease. 
C)  will not change. 
D)  drop to zero.

Question 5

Exhibit 11-2
  
-Refer to Exhibit 11-2.Compare points A and B.Which of the following is true?

Accepted Answer

A)  At A and B, the tax rates are the same, but tax revenues are different. 
B)  At A tax rates are higher than at B, but tax revenues are the same. 
C)  At B tax rates are higher than at A, but tax revenues are the same. 
D)  none of the above 
A)  At A and B, the tax rates are the same, but tax revenues are different. 
B)  At A tax rates are higher than at B, but tax revenues are the same. 
C)  At B tax rates are higher than at A, but tax revenues are the same. 
D)  none of the above

Question 6

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

Accepted Answer

A)  net 
B)  gross 
C)  cyclical 
D)  structural 
A)  net 
B)  gross 
C)  cyclical 
D)  structural

Question 7

There is zero crowding out and the federal budget is balanced at the time government purchases are increased.It follows that the __________ curve shifts to the __________,and in the short run both the price level and Real GDP __________.

Accepted Answer

A)  AD; left; rise 
B)  AD; right; fall 
C)  AD; right; rise 
D)  AD; left; fall 
E)  SRAS; right; rise 
A)  AD; left; rise 
B)  AD; right; fall 
C)  AD; right; rise 
D)  AD; left; fall 
E)  SRAS; right; rise

Question 8

An example of expansionary fiscal policy is

Accepted Answer

A)  increasing government expenditures. 
B)  increasing taxes. 
C)  decreasing government expenditures. 
D)  decreasing taxes. 
E)  a and d 
A)  increasing government expenditures. 
B)  increasing taxes. 
C)  decreasing government expenditures. 
D)  decreasing taxes. 
E)  a and d

Question 9

A value-added tax (VAT)is a less visible form of a sales tax.

Accepted Answer

A) True 
 B)False

Question 10

If Smith believes the economy is self-regulating,then Smith

Accepted Answer

A)  is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. 
B)  is more likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. 
C)  will believe that there is zero crowding out, too. 
D)  will believe that wages are inflexible downward, too. 
E)  b and d 
A)  is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. 
B)  is more likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. 
C)  will believe that there is zero crowding out, too. 
D)  will believe that wages are inflexible downward, too. 
E)  b and d

Question 11

Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $500 million.This is an example of

Accepted Answer

A)  incomplete crowding out. 
B)  complete crowding out. 
C)  zero crowding out. 
D)  a and c 
E)  none of the above 
A)  incomplete crowding out. 
B)  complete crowding out. 
C)  zero crowding out. 
D)  a and c 
E)  none of the above

Question 12

Increased government spending and tax cuts characterize

Accepted Answer

A)  contractionary fiscal policy. 
B)  expansionary fiscal policy. 
C)  expansionary monetary policy. 
D)  deflationary policy. 
E)  none of the above 
A)  contractionary fiscal policy. 
B)  expansionary fiscal policy. 
C)  expansionary monetary policy. 
D)  deflationary policy. 
E)  none of the above

Question 13

Exhibit 11-4
  
-Refer to Exhibit 11-4. If a person's taxable income is $90,000,how much does he pay in taxes?

Accepted Answer

A)  $17,600. 
B)  $19,250. 
C)  $8,780. 
D)  $22,500. 
A)  $17,600. 
B)  $19,250. 
C)  $8,780. 
D)  $22,500.

Question 14

Some economists believe that higher marginal income tax rates __________ the incentive to work and thus shift the __________.

Accepted Answer

A)  increase; AD curve to the right 
B)  increase; SRAS curve to the right 
C)  increase; SRAS curve to the left 
D)  decrease; AD curve to the left 
E)  decrease; SRAS curve to the left 
A)  increase; AD curve to the right 
B)  increase; SRAS curve to the right 
C)  increase; SRAS curve to the left 
D)  decrease; AD curve to the left 
E)  decrease; SRAS curve to the left

Question 15

The period that elapses between the passage of legislation reducing taxes and the time the tax cut is put into effect is called the __________ lag.

Accepted Answer

A)  data 
B)  wait-and-see 
C)  legislative 
D)  transmission 
A)  data 
B)  wait-and-see 
C)  legislative 
D)  transmission

Question 16

The transmission lag is the period that elapses between the time fiscal policy is enacted and the time it is put into effect.

Accepted Answer

A) True 
 B)False

Question 17

The lag between an increase in government spending and the impact of this increased spending on the economy is called the __________ lag.

Accepted Answer

A)  effectiveness 
B)  transmission 
C)  legislative 
D)  data 
A)  effectiveness 
B)  transmission 
C)  legislative 
D)  data

Question 18

What are the two types of discretionary fiscal policy?

Accepted Answer

A)  automatic and expansionary 
B)  expansionary and contractionary 
C)  expansionary and recessionary 
D)  automatic and contractionary 
A)  automatic and expansionary 
B)  expansionary and contractionary 
C)  expansionary and recessionary 
D)  automatic and contractionary

Question 19

The deficit that exists when the economy operates at full employment is called the __________ deficit.

Accepted Answer

A)  net 
B)  gross 
C)  cyclical 
D)  structural 
A)  net 
B)  gross 
C)  cyclical 
D)  structural

Question 20

To eliminate an inflationary gap,Keynesian theory indicates that government should

Accepted Answer

A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  either a or d 
A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  either a or d

Exam 11: Fiscal Policy and the Federal Budget

The unique feature of a progressive income tax is that the higher one's income (up to some point),the __________ one pays.

Define the term budget deficit (as it applies to the federal government)and describe the difference between a cyclical deficit and a structural deficit. Provide a hypothetical numerical example to help support your answer.

An example of expansionary fiscal policy is

Exhibit 11-2 -Refer to Exhibit 11-2.At point B,if we cut tax rates slightly,tax revenues

Exhibit 11-2 -Refer to Exhibit 11-2.Compare points A and B.Which of the following is true?

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

There is zero crowding out and the federal budget is balanced at the time government purchases are increased.It follows that the __________ curve shifts to the __________,and in the short run both the price level and Real GDP __________.

An example of expansionary fiscal policy is

A value-added tax (VAT)is a less visible form of a sales tax.

If Smith believes the economy is self-regulating,then Smith

Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $500 million.This is an example of

Increased government spending and tax cuts characterize

Exhibit 11-4 -Refer to Exhibit 11-4. If a person's taxable income is $90,000,how much does he pay in taxes?

Some economists believe that higher marginal income tax rates __________ the incentive to work and thus shift the __________.

The period that elapses between the passage of legislation reducing taxes and the time the tax cut is put into effect is called the __________ lag.

The transmission lag is the period that elapses between the time fiscal policy is enacted and the time it is put into effect.

The lag between an increase in government spending and the impact of this increased spending on the economy is called the __________ lag.

What are the two types of discretionary fiscal policy?

The deficit that exists when the economy operates at full employment is called the __________ deficit.

To eliminate an inflationary gap,Keynesian theory indicates that government should

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

There is zero crowding out and the federal budget is balanced at the time government purchases are increased.It follows that the curve shifts to the ,and in the short run both the price level and Real GDP __.

Some economists believe that higher marginal income tax rates the incentive to work and thus shift the .