Question 1

Personal income taxes are the largest source of revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 2

Britain is cutting its value added tax (which is similar to a sales tax) to 15 percent from 17.5 percent to encourage British consumers to keep spending money. According to the supply side view,

Accepted Answer

A)  will weaken the incentive to work 
B)  will increase the tax wedge 
C)  this is equivalent to increasing the real wage rate. 
D)  will shift the labor supply curve leftward 
A)  will weaken the incentive to work 
B)  will increase the tax wedge 
C)  this is equivalent to increasing the real wage rate. 
D)  will shift the labor supply curve leftward

Question 3

The government's fiscal policy includes automatic stabilizers that automatically

Accepted Answer

A)  increase spending during a recession. 
B)  increase transfer payments in a recession. 
C)  decrease spending during an expansionary boom. 
D)  All of the above answers are correct. 
A)  increase spending during a recession. 
B)  increase transfer payments in a recession. 
C)  decrease spending during an expansionary boom. 
D)  All of the above answers are correct.

Question 4

In an economy, the government expenditure multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level and real GDP $3 million.

Accepted Answer

A)  rises; decreases by less than 
B)  rises; increases by less than 
C)  falls; decreases by less than 
D)  rises; equals 
A)  rises; decreases by less than 
B)  rises; increases by less than 
C)  falls; decreases by less than 
D)  rises; equals

Question 5

An example of a discretionary fiscal policy is when

Accepted Answer

A)  tax receipts fall as incomes fall. 
B)  food stamp payments rise when the economy is in a recession. 
C)  unemployment compensation payments rise with unemployment rates. 
D)  Congress passes a law that raises personal marginal tax rates. 
A)  tax receipts fall as incomes fall. 
B)  food stamp payments rise when the economy is in a recession. 
C)  unemployment compensation payments rise with unemployment rates. 
D)  Congress passes a law that raises personal marginal tax rates.

Question 6

How do needs- tested spending programs affect the size of the government expenditure multiplier?

Accepted Answer

A)  They increase its size. 
B)  They reduce its size. 
C)  They have no effect on its size. 
D)  The answer depends on the presence of induced taxes in the economy in addition to needs- tested spending programs. 
A)  They increase its size. 
B)  They reduce its size. 
C)  They have no effect on its size. 
D)  The answer depends on the presence of induced taxes in the economy in addition to needs- tested spending programs.

Question 7

-In the above figure,

Accepted Answer

A)  any surpluses are cyclical surpluses. 
B)  the structural deficit equals zero. 
C)  any deficits are cyclical deficits. 
D)  All of the above answers are correct. 
A)  any surpluses are cyclical surpluses. 
B)  the structural deficit equals zero. 
C)  any deficits are cyclical deficits. 
D)  All of the above answers are correct.

Question 8

An increase in government expenditure leads to rightward shift of the AD curve.

Accepted Answer

A) True 
 B)False

Question 9

Whenever the federal government spends more than it receives in tax revenue, then by definition it

Accepted Answer

A)  increases economic growth. 
B)  runs a budget surplus. 
C)  operates a balanced budget. 
D)  runs a budget deficit. 
A)  increases economic growth. 
B)  runs a budget surplus. 
C)  operates a balanced budget. 
D)  runs a budget deficit.

Question 10

Induced taxes during recessions and during expansions.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  increase; expansions 
D)  decrease; increase 
A)  increase; increase 
B)  decrease; decrease 
C)  increase; expansions 
D)  decrease; increase

Question 11

The effects of a change in government expenditures is multiplied throughout an economy

Accepted Answer

A)  because government expenditure generates changes in consumption expenditure. 
B)  because taxes are left unchanged. 
C)  only when there is a decrease in expenditure. 
D)  only when there is an increase in expenditure. 
A)  because government expenditure generates changes in consumption expenditure. 
B)  because taxes are left unchanged. 
C)  only when there is a decrease in expenditure. 
D)  only when there is an increase in expenditure.

Question 12

If taxes exactly equaled government outlays in a year the

Accepted Answer

A)  federal government debt would decrease. 
B)  budget deficit would not change. 
C)  federal government debt would be zero. 
D)  budget deficit would be zero. 
A)  federal government debt would decrease. 
B)  budget deficit would not change. 
C)  federal government debt would be zero. 
D)  budget deficit would be zero.

Question 13

A discretionary fiscal policy is a fiscal policy that

Accepted Answer

A)  involves a change in corporate tax rates. 
B)  requires action by the Congress. 
C)  is triggered by the state of the economy. 
D)  involves a change in government defense spending. 
A)  involves a change in corporate tax rates. 
B)  requires action by the Congress. 
C)  is triggered by the state of the economy. 
D)  involves a change in government defense spending.

Question 14

Induced taxes increase the size of the government expenditure multiplier.

Accepted Answer

A) True 
 B)False

Question 15

The supply side effects of a cut in tax rates include _ in the supply of labor and in the supply of loanable funds.

Accepted Answer

A)  a decrease; an increase 
B)  a decrease; a decrease 
C)  an increase; a decrease 
D)  an increase; an increase 
A)  a decrease; an increase 
B)  a decrease; a decrease 
C)  an increase; a decrease 
D)  an increase; an increase

Question 16

Each president can decide when to submit a budget to Congress.

Accepted Answer

A) True 
 B)False

Question 17

The difference between automatic fiscal policy and discretionary fiscal policy is that

Accepted Answer

A)  the President has nothing to do with discretionary fiscal policy. 
B)  Congress must pass laws implementing discretionary fiscal policy. 
C)  the President initiates discretionary fiscal policy. 
D)  Congress initiates automatic fiscal policy. 
A)  the President has nothing to do with discretionary fiscal policy. 
B)  Congress must pass laws implementing discretionary fiscal policy. 
C)  the President initiates discretionary fiscal policy. 
D)  Congress initiates automatic fiscal policy.

Question 18

If the government raises taxes on labor income and interest income, explain how potential GDP and economic growth are affected.

Accepted Answer

Tax increases on labor income decrease t

Question 19

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $12 trillion. If real GDP is $8 trillion, then the government has a
)

Accepted Answer

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

Question 20

Those people who believe fiscal policy has a big effect on employment and potential GDP are called

Accepted Answer

A)  libertarians. 
B)  demand- siders. 
C)  fiscalists. 
D)  supply- siders. 
A)  libertarians. 
B)  demand- siders. 
C)  fiscalists. 
D)  supply- siders.

Personal income taxes are the largest source of revenue for the federal government.

Britain is cutting its value added tax (which is similar to a sales tax) to 15 percent from 17.5 percent to encourage British consumers to keep spending money. According to the supply side view,

The government's fiscal policy includes automatic stabilizers that automatically

In an economy, the government expenditure multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level and real GDP $3 million.

An example of a discretionary fiscal policy is when

How do needs- tested spending programs affect the size of the government expenditure multiplier?

-In the above figure,

An increase in government expenditure leads to rightward shift of the AD curve.

Whenever the federal government spends more than it receives in tax revenue, then by definition it

Induced taxes during recessions and during expansions.

The effects of a change in government expenditures is multiplied throughout an economy

If taxes exactly equaled government outlays in a year the

A discretionary fiscal policy is a fiscal policy that

Induced taxes increase the size of the government expenditure multiplier.

The supply side effects of a cut in tax rates include _ in the supply of labor and in the supply of loanable funds.

Each president can decide when to submit a budget to Congress.

The difference between automatic fiscal policy and discretionary fiscal policy is that

If the government raises taxes on labor income and interest income, explain how potential GDP and economic growth are affected.

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $12 trillion. If real GDP is $8 trillion, then the government has a )

Those people who believe fiscal policy has a big effect on employment and potential GDP are called

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

Personal income taxes are the largest source of revenue for the federal government.

Britain is cutting its value added tax (which is similar to a sales tax) to 15 percent from 17.5 percent to encourage British consumers to keep spending money. According to the supply side view,

The government's fiscal policy includes automatic stabilizers that automatically

In an economy, the government expenditure multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level and real GDP $3 million.

An example of a discretionary fiscal policy is when

How do needs- tested spending programs affect the size of the government expenditure multiplier?

-In the above figure,

An increase in government expenditure leads to rightward shift of the AD curve.

Whenever the federal government spends more than it receives in tax revenue, then by definition it

Induced taxes during recessions and during expansions.

The effects of a change in government expenditures is multiplied throughout an economy

If taxes exactly equaled government outlays in a year the

A discretionary fiscal policy is a fiscal policy that

Induced taxes increase the size of the government expenditure multiplier.

The supply side effects of a cut in tax rates include _ in the supply of labor and in the supply of loanable funds.

Each president can decide when to submit a budget to Congress.

The difference between automatic fiscal policy and discretionary fiscal policy is that

If the government raises taxes on labor income and interest income, explain how potential GDP and economic growth are affected.

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $12 trillion. If real GDP is $8 trillion, then the government has a )

Those people who believe fiscal policy has a big effect on employment and potential GDP are called

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