Question 1

Which of the following reduces the size of the government expenditure multiplier?

Accepted Answer

A)  A decrease in the marginal tax rate. 
B)  An increase in the marginal propensity to consume. 
C)  The presence of induced taxes. 
D)  A decrease in the marginal propensity to import. 
A)  A decrease in the marginal tax rate. 
B)  An increase in the marginal propensity to consume. 
C)  The presence of induced taxes. 
D)  A decrease in the marginal propensity to import.

Question 2

Which branches of the government play a role in the enacting the federal budget?
I. the President.
II. the House of Representatives.
III. the Senate.

Accepted Answer

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

Question 3

Induced taxes

Accepted Answer

A)  are autonomous. 
B)  vary with real GDP. 
C)  are fixed over time. 
D)  are independent of real GDP. 
A)  are autonomous. 
B)  vary with real GDP. 
C)  are fixed over time. 
D)  are independent of real GDP.

Question 4

-The table above shows the aggregate production function in the economy of Prescottia. The people of Prescottia taxes and are willing to work 248 million hours a year for a real wage rate of $8 an hour, and for each dollar incr the real wage, they are willing to work 4 million additional hours per year.
a) Draw the economy's aggregate production function.
b) Prescottia's demand for labor schedule is in the table above. Draw Prescottia's demand for labor and supply curves.
c) What are the economy's full- employment quantity of labor and real wage rate? What is the country's potent GDP?
d) Suppose that Prescottia's government introduces a 25 percent income tax. Using your graph, what happens t demand for labor? What happens to the supply of labor? Explain.
e) After the tax is imposed, what happens to Prescottia's full- employment quantity of labor? What happens to Prescottia's potential GDP?

Accepted Answer

quantity of labor decreases from 280 to

Question 5

Which of the following statements regarding the U.S government's budget surpluses and deficits is correct?

Accepted Answer

A)  If tax revenues exceed outlays, the government has a budget deficit. 
B)  During the 1980s large deficits arose from a combination of tax cuts and expenditure increases. 
C)  Budget deficits tend to shrink during periods of recession. 
D)  Since 1980, federal tax revenues have generally exceeded outlays. 
A)  If tax revenues exceed outlays, the government has a budget deficit. 
B)  During the 1980s large deficits arose from a combination of tax cuts and expenditure increases. 
C)  Budget deficits tend to shrink during periods of recession. 
D)  Since 1980, federal tax revenues have generally exceeded outlays.

Question 6

With a steep short- run aggregate supply curve,

Accepted Answer

A)  an increase in taxes that does not change potential GDP will not decrease real GDP by much. 
B)  there is a large change in real GDP whenever the price level rises. 
C)  fiscal policy will be an effective tool to reduce unemployment without raising prices too much. 
D)  an increase in government expenditure will not have an impact on the price level. 
A)  an increase in taxes that does not change potential GDP will not decrease real GDP by much. 
B)  there is a large change in real GDP whenever the price level rises. 
C)  fiscal policy will be an effective tool to reduce unemployment without raising prices too much. 
D)  an increase in government expenditure will not have an impact on the price level.

Question 7

The above table gives a country's government outlays and tax receipts for 2003 through 2007. During which years did the country have a balanced budget, budget surplus, and budget deficit?

Accepted Answer

The country had a balanced budget in 200

Question 8

The largest item of government outlays is .

Accepted Answer

A)  debt reduction 
B)  transfer payments 
C)  expenditures on goods and services 
D)  debt interest 
A)  debt reduction 
B)  transfer payments 
C)  expenditures on goods and services 
D)  debt interest

Question 9

Automatic stabilizers

Accepted Answer

A)  are triggered by the business cycle. 
B)  are caused by a change in government expenditures. 
C)  require an act of Congress. 
D)  are caused by changes in personal tax rates. 
A)  are triggered by the business cycle. 
B)  are caused by a change in government expenditures. 
C)  require an act of Congress. 
D)  are caused by changes in personal tax rates.

Question 10

-In the above figure, if the economy is initially at point D and taxes are cut, if potential GDP does not change then the economy will move to point

Accepted Answer

A)  move to point A. 
B)  stay at point D. 
C)  move to point B. 
D)  move to point C. 
A)  move to point A. 
B)  stay at point D. 
C)  move to point B. 
D)  move to point C.

Question 11

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 1?

Accepted Answer

A)  $240 billion 
B)  $0 
C)  $25 billion 
D)  Not enough information is provided to answer the question. 
A)  $240 billion 
B)  $0 
C)  $25 billion 
D)  Not enough information is provided to answer the question.

Question 12

Suppose the tax rate on interest income is 25 percent, the real interest rate is 4 percent, and the inflation rate is 4 percent. In this case, the real after- tax interest rate is

Accepted Answer

A)  .5 percent. 
B)  4.0 percent 
C)  2.0 percent. 
D)    3.5 percent 
A)  .5 percent. 
B)  4.0 percent 
C)  2.0 percent. 
D)    3.5 percent

Question 13

Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive,

Accepted Answer

A)  interest payments on the debt immediately will decrease. 
B)  government debt will decrease. 
C)  the country will experience a budget surplus. 
D)  government debt will increase. 
A)  interest payments on the debt immediately will decrease. 
B)  government debt will decrease. 
C)  the country will experience a budget surplus. 
D)  government debt will increase.

Question 14

Once supply side effects are taken into account, tax cuts for labor income can change
I. the supply of labor
II. potential GDP.

Accepted Answer

A)  II only 
B)  I and II 
C)  I only 
D)  Neither I nor II. 
A)  II only 
B)  I and II 
C)  I only 
D)  Neither I nor II.

Question 15

-What is the amount of the surplus or deficit incurred in year 1 by the government shown in the above table?

Accepted Answer

A)  $240 billion surplus 
B)  $0 
C)  $25 billion deficit 
D)  $25 billion surplus 
A)  $240 billion surplus 
B)  $0 
C)  $25 billion deficit 
D)  $25 billion surplus

Question 16

In response to the economic crisis in 2008, President Merkel "highlighted in her speech what the Ge government has already done: a financial sector rescue package worth up to €500 billion, and a prop stimulus package of tax breaks [on income] and spending measures aimed at triggering investment to €50 billion over the next two years."
HYPERLINK "http://www.iht.com/" www.iht.com, 11/26/20
Which parts of the stimulus plan will increase labor supply?

Accepted Answer

A)  spending measures targeted at investment 
B)  tax breaks 
C)  financial sector rescue package 
D)  all of the above 
A)  spending measures targeted at investment 
B)  tax breaks 
C)  financial sector rescue package 
D)  all of the above

Question 17

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

Accepted Answer

A)  the Federal Reserve Board 
B)  the House of Representatives 
C)  the Senate 
D)  the President and his cabinet 
A)  the Federal Reserve Board 
B)  the House of Representatives 
C)  the Senate 
D)  the President and his cabinet

Question 18

The largest component of the fiscal imbalance is

Accepted Answer

A)  Medicare. 
B)  Defense spending. 
C)  Social Security. 
D)  none of the above 
A)  Medicare. 
B)  Defense spending. 
C)  Social Security. 
D)  none of the above

Question 19

The difference between the before- tax and after- tax rates is referred to as the

Accepted Answer

A)  tax plug. 
B)  deadweight gain. 
C)  taxation penalty. 
D)  tax wedge. 
A)  tax plug. 
B)  deadweight gain. 
C)  taxation penalty. 
D)  tax wedge.

Question 20

Which of the following relationships is correct?

Accepted Answer

A)  actual budget deficit = structural deficit + cyclical deficit 
B)  cyclical surplus = actual budget deficit - cyclical deficit 
C)  actual budget deficit = structural deficit - cyclical deficit 
D)  cyclical deficit = actual budget deficit + structural deficit 
A)  actual budget deficit = structural deficit + cyclical deficit 
B)  cyclical surplus = actual budget deficit - cyclical deficit 
C)  actual budget deficit = structural deficit - cyclical deficit 
D)  cyclical deficit = actual budget deficit + structural deficit

Which of the following reduces the size of the government expenditure multiplier?

Which branches of the government play a role in the enacting the federal budget? I. the President. II. the House of Representatives. III. the Senate.

Induced taxes

Which of the following statements regarding the U.S government's budget surpluses and deficits is correct?

With a steep short- run aggregate supply curve,

The above table gives a country's government outlays and tax receipts for 2003 through 2007. During which years did the country have a balanced budget, budget surplus, and budget deficit?

The largest item of government outlays is .

Automatic stabilizers

-In the above figure, if the economy is initially at point D and taxes are cut, if potential GDP does not change then the economy will move to point

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 1?

Suppose the tax rate on interest income is 25 percent, the real interest rate is 4 percent, and the inflation rate is 4 percent. In this case, the real after- tax interest rate is

Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive,

Once supply side effects are taken into account, tax cuts for labor income can change I. the supply of labor II. potential GDP.

-What is the amount of the surplus or deficit incurred in year 1 by the government shown in the above table?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

The largest component of the fiscal imbalance is

The difference between the before- tax and after- tax rates is referred to as the

Which of the following relationships is correct?

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

Which of the following reduces the size of the government expenditure multiplier?

Which branches of the government play a role in the enacting the federal budget? I. the President. II. the House of Representatives. III. the Senate.

Induced taxes

Which of the following statements regarding the U.S government's budget surpluses and deficits is correct?

With a steep short- run aggregate supply curve,

The above table gives a country's government outlays and tax receipts for 2003 through 2007. During which years did the country have a balanced budget, budget surplus, and budget deficit?

The largest item of government outlays is .

Automatic stabilizers

-In the above figure, if the economy is initially at point D and taxes are cut, if potential GDP does not change then the economy will move to point

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 1?

Suppose the tax rate on interest income is 25 percent, the real interest rate is 4 percent, and the inflation rate is 4 percent. In this case, the real after- tax interest rate is

Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive,

Once supply side effects are taken into account, tax cuts for labor income can change I. the supply of labor II. potential GDP.

-What is the amount of the surplus or deficit incurred in year 1 by the government shown in the above table?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

The largest component of the fiscal imbalance is

The difference between the before- tax and after- tax rates is referred to as the

Which of the following relationships is correct?

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