Question 1

If a tax cut increases people's labor supply, then

Accepted Answer

A)  tax cuts cannot affect aggregate demand. 
B)  tax cuts increase potential GDP. 
C)  tax cuts decrease aggregate demand. 
D)  Both answers A and B are correct. 
A)  tax cuts cannot affect aggregate demand. 
B)  tax cuts increase potential GDP. 
C)  tax cuts decrease aggregate demand. 
D)  Both answers A and B are correct. B

Question 2

An increase in the tax on interest income _ the supply of saving and the equilibrium investment.

Accepted Answer

A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  increases; decreases 
A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  increases; decreases C

Question 3

The U.S. federal budget over the past 20 plus years has been

Accepted Answer

A)  in deficit most of the years. 
B)  in surplus most of the years. 
C)  in surplus about half the time and deficit the other half. 
D)  in balance most years. 
A)  in deficit most of the years. 
B)  in surplus most of the years. 
C)  in surplus about half the time and deficit the other half. 
D)  in balance most years. A

Question 4

-Using the above figure, if full employment occurs at $12 trillion and the economy is actually producing $12 trillion, then there is a

Accepted Answer

A)  cyclical surplus. 
B)  structural surplus. 
C)  cyclical deficit. 
D)  structural deficit. 
A)  cyclical surplus. 
B)  structural surplus. 
C)  cyclical deficit. 
D)  structural deficit.

Question 5

A government that currently has a budget deficit can balance its budget by .

Accepted Answer

A)  increasing tax revenues by more than it increases outlays 
B)  increasing both tax revenues and outlays by the same amount 
C)  decreasing tax revenues by more than it increases outlays 
D)  decreasing tax revenues by more than it decreases outlays 
A)  increasing tax revenues by more than it increases outlays 
B)  increasing both tax revenues and outlays by the same amount 
C)  decreasing tax revenues by more than it increases outlays 
D)  decreasing tax revenues by more than it decreases outlays

Question 6

If the economy falls into a recession, which of the following responses constitutes the use of an automatic stabilizer?

Accepted Answer

A)  an income tax cut voted on by Congress and quickly signed by the President 
B)  a new program to fund local governments' hiring of 100,000 street sweepers within a year 
C)  an existing system to direct government payments to the growing ranks of unemployed workers 
D)  All of the above answers are correct. 
A)  an income tax cut voted on by Congress and quickly signed by the President 
B)  a new program to fund local governments' hiring of 100,000 street sweepers within a year 
C)  an existing system to direct government payments to the growing ranks of unemployed workers 
D)  All of the above answers are correct.

Question 7

The budget process includes the

Accepted Answer

A)  President proposing and Congress passing the budget. 
B)  Senate proposing and the House of Representatives passing the budget. 
C)  President passing the budget as proposed by Congress. 
D)  House of Representatives proposing and the Senate passing the budget. 
A)  President proposing and Congress passing the budget. 
B)  Senate proposing and the House of Representatives passing the budget. 
C)  President passing the budget as proposed by Congress. 
D)  House of Representatives proposing and the Senate passing the budget.

Question 8

Automatic stabilization occurs

Accepted Answer

A)  because government expenditures on goods and services fluctuate with real GDP. 
B)  because taxes and transfer payments fluctuate with real GDP. 
C)  because monetary policy is effective. 
D)  when the Congress makes changes to transfer payment programs. 
A)  because government expenditures on goods and services fluctuate with real GDP. 
B)  because taxes and transfer payments fluctuate with real GDP. 
C)  because monetary policy is effective. 
D)  when the Congress makes changes to transfer payment programs.

Question 9

An advantage of automatic stabilizers over discretionary fiscal policy is that

Accepted Answer

A)  automatic stabilizers require only a simple majority of Congress to pass whereas discretionary fiscal policy requires a two- thirds majority to pass. 
B)  only the President is involved in implementing automatic stabilizers instead of both the President and Congress. 
C)  automatic stabilizers are not subject to all the same time lags that discretionary fiscal policy is. 
D)  automatic stabilizers can be easily fine- tuned to move the economy to full employment. 
A)  automatic stabilizers require only a simple majority of Congress to pass whereas discretionary fiscal policy requires a two- thirds majority to pass. 
B)  only the President is involved in implementing automatic stabilizers instead of both the President and Congress. 
C)  automatic stabilizers are not subject to all the same time lags that discretionary fiscal policy is. 
D)  automatic stabilizers can be easily fine- tuned to move the economy to full employment.

Question 10

Ignoring any supply- side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the autonomous tax multiplier? Explain your answer.

Accepted Answer

The magnitude of the government expendit

Question 11

Depending on the relative size of the federal government's outlays and tax receipts, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government outlays and tax receipts for each?

Accepted Answer

The federal government's budget could ha

Question 12

Comparing the fiscal imbalance for the current generation versus future generations, it is the case that

Accepted Answer

A)  the current generation pays a larger share of the fiscal imbalance. 
B)  each generation pays all of its fiscal imbalance. 
C)  each generation pays half of the fiscal imbalance. 
D)  future generations pay a larger share of the fiscal imbalance. 
A)  the current generation pays a larger share of the fiscal imbalance. 
B)  each generation pays all of its fiscal imbalance. 
C)  each generation pays half of the fiscal imbalance. 
D)  future generations pay a larger share of the fiscal imbalance.

Question 13

Using the AD- AS model, an increase in government expenditure

Accepted Answer

A)  has no impact on real GDP, but will increase potential GDP. 
B)  increases both real GDP and the price level. 
C)  has a full multiplier effect on real GDP, leaving the price level unchanged in the long run. 
D)  has no impact on real GDP. 
A)  has no impact on real GDP, but will increase potential GDP. 
B)  increases both real GDP and the price level. 
C)  has a full multiplier effect on real GDP, leaving the price level unchanged in the long run. 
D)  has no impact on real GDP.

Question 14

The government receives tax revenues from several sources. Rank the following sources from larges the smallest.
I. corporate income taxes
II. personal income taxes
III. Social Security taxes

Accepted Answer

A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  I, II, III 
A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  I, II, III

Question 15

In 2007, Norway's government had revenue of $226.3 billion and expenditures of $158.7 billion. At the same time, GDP totalled $392 billion and government debt was about 67 percent of GDP. In 2007, Norway's government ran a government budget _ and government debt .

Accepted Answer

A)  deficit; increased 
B)  deficit; decreased 
C)  surplus; decreased 
D)  surplus; increased 
A)  deficit; increased 
B)  deficit; decreased 
C)  surplus; decreased 
D)  surplus; increased

Question 16

Automatic stabilizers are at work if, as real GDP increases, .

Accepted Answer

A)  transfer payments increase and tax revenues decrease 
B)  transfer payments decrease and interest rates decrease 
C)  tax revenues decrease and interest rates increase 
D)  tax revenues increase and transfer payments decrease 
A)  transfer payments increase and tax revenues decrease 
B)  transfer payments decrease and interest rates decrease 
C)  tax revenues decrease and interest rates increase 
D)  tax revenues increase and transfer payments decrease

Question 17

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full- employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy,

Accepted Answer

A)  an equilibrium with real GDP less than potential GDP will occur. 
B)  aggregate demand will increase. 
C)  potential GDP decreases. 
D)  None of the above answers is correct.. 
A)  an equilibrium with real GDP less than potential GDP will occur. 
B)  aggregate demand will increase. 
C)  potential GDP decreases. 
D)  None of the above answers is correct..

Question 18

In 2007, Denmark's government had expenditures of $157 billion and spending of $171 billion. GDP in 2007 was $312 billion. The government ran a budget and government debt
)

Accepted Answer

A)  surplus; increased 
B)  surplus decreased 
C)  deficit; decreased 
D)  deficit; increased 
A)  surplus; increased 
B)  surplus decreased 
C)  deficit; decreased 
D)  deficit; increased

Question 19

The Council of Economic Advisers

Accepted Answer

A)  proposes the president's budget each year. 
B)  helps the president make changes in monetary policy. 
C)  approves fiscal policy changes. 
D)  helps the president and the public stay informed about the state of the economy. 
A)  proposes the president's budget each year. 
B)  helps the president make changes in monetary policy. 
C)  approves fiscal policy changes. 
D)  helps the president and the public stay informed about the state of the economy.

Question 20

Looking at the supply- side effects on aggregate supply shows that a tax hike on labor income

Accepted Answer

A)  weakens the incentive to work. 
B)  decreases potential GDP. 
C)  increases potential GDP because people work more to pay the higher taxes. 
D)  Both answers A and B are correct. 
A)  weakens the incentive to work. 
B)  decreases potential GDP. 
C)  increases potential GDP because people work more to pay the higher taxes. 
D)  Both answers A and B are correct.

If a tax cut increases people's labor supply, then

An increase in the tax on interest income _ the supply of saving and the equilibrium investment.

The U.S. federal budget over the past 20 plus years has been

-Using the above figure, if full employment occurs at $12 trillion and the economy is actually producing $12 trillion, then there is a

A government that currently has a budget deficit can balance its budget by .

If the economy falls into a recession, which of the following responses constitutes the use of an automatic stabilizer?

The budget process includes the

Automatic stabilization occurs

An advantage of automatic stabilizers over discretionary fiscal policy is that

Ignoring any supply- side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the autonomous tax multiplier? Explain your answer.

Depending on the relative size of the federal government's outlays and tax receipts, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government outlays and tax receipts for each?

Comparing the fiscal imbalance for the current generation versus future generations, it is the case that

Using the AD- AS model, an increase in government expenditure

The government receives tax revenues from several sources. Rank the following sources from larges the smallest. I. corporate income taxes II. personal income taxes III. Social Security taxes

In 2007, Norway's government had revenue of $226.3 billion and expenditures of $158.7 billion. At the same time, GDP totalled $392 billion and government debt was about 67 percent of GDP. In 2007, Norway's government ran a government budget _ and government debt .

Automatic stabilizers are at work if, as real GDP increases, .

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full- employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy,

In 2007, Denmark's government had expenditures of $157 billion and spending of $171 billion. GDP in 2007 was $312 billion. The government ran a budget and government debt )

The Council of Economic Advisers

Looking at the supply- side effects on aggregate supply shows that a tax hike on labor income

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

If a tax cut increases people's labor supply, then

An increase in the tax on interest income _ the supply of saving and the equilibrium investment.

The U.S. federal budget over the past 20 plus years has been

-Using the above figure, if full employment occurs at $12 trillion and the economy is actually producing $12 trillion, then there is a

A government that currently has a budget deficit can balance its budget by .

If the economy falls into a recession, which of the following responses constitutes the use of an automatic stabilizer?

The budget process includes the

Automatic stabilization occurs

An advantage of automatic stabilizers over discretionary fiscal policy is that

Ignoring any supply- side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the autonomous tax multiplier? Explain your answer.

Depending on the relative size of the federal government's outlays and tax receipts, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government outlays and tax receipts for each?

Comparing the fiscal imbalance for the current generation versus future generations, it is the case that

Using the AD- AS model, an increase in government expenditure

The government receives tax revenues from several sources. Rank the following sources from larges the smallest. I. corporate income taxes II. personal income taxes III. Social Security taxes

In 2007, Norway's government had revenue of $226.3 billion and expenditures of $158.7 billion. At the same time, GDP totalled $392 billion and government debt was about 67 percent of GDP. In 2007, Norway's government ran a government budget _ and government debt .

Automatic stabilizers are at work if, as real GDP increases, .

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full- employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy,

In 2007, Denmark's government had expenditures of $157 billion and spending of $171 billion. GDP in 2007 was $312 billion. The government ran a budget and government debt )

The Council of Economic Advisers

Looking at the supply- side effects on aggregate supply shows that a tax hike on labor income

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Filters