Question 1

An increase in taxes on labor income can decrease potential GDP.

Accepted Answer

A) True 
 B)False

Question 2

The size of the government expenditure multiplier is by induced taxes and by needs- tested spending.

Accepted Answer

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

Question 3

If we compare the United States to France, we see that potential GDP per person in France is
Than that in the United States because the French tax wedge is than the U.S. tax wedge.

Accepted Answer

A)  less; larger 
B)  greater; smaller 
C)  less; smaller 
D)  greater; larger 
A)  less; larger 
B)  greater; smaller 
C)  less; smaller 
D)  greater; larger

Question 4

The structural deficit is that deficit that would exist

Accepted Answer

A)  with the taxes and outlays that would occur if the economy was at the equilibrium level of real GDP. 
B)  if tax rates were set to maximize tax revenues. 
C)  with the taxes and outlays that would occur if the economy was at the full employment level of real GDP. 
D)  if there were no discretionary fiscal interventions into the economy. 
A)  with the taxes and outlays that would occur if the economy was at the equilibrium level of real GDP. 
B)  if tax rates were set to maximize tax revenues. 
C)  with the taxes and outlays that would occur if the economy was at the full employment level of real GDP. 
D)  if there were no discretionary fiscal interventions into the economy.

Question 5

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

Accepted Answer

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

Question 6

When real GDP is less than potential GDP, an increase in government expenditures will real GDP and _ the price level.

Accepted Answer

A)  decrease; raise 
B)  increase; lower 
C)  decrease; lower 
D)  increase; raise 
A)  decrease; raise 
B)  increase; lower 
C)  decrease; lower 
D)  increase; raise

Question 7

The government budget deficit tends to decline during the expansion phase of a business cycle because tax revenues _ and government transfer payments .

Accepted Answer

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

Question 8

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 5?

Accepted Answer

A)  - $20 billion (The government has net saving rather than debt.) 
B)  $325 billion 
C)  $35 billion 
D)  $50 billion 
A)  - $20 billion (The government has net saving rather than debt.) 
B)  $325 billion 
C)  $35 billion 
D)  $50 billion

Question 9

What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a recession and during an expansion?

Accepted Answer

Automatic stabilizers are features of fi

Question 10

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

Accepted Answer

A)  $40 billion. 
B)  $60 billion. 
C)  $10 billion. 
D)  $50 billion 
A)  $40 billion. 
B)  $60 billion. 
C)  $10 billion. 
D)  $50 billion

Question 11

All of the following are part of fiscal policy EXCEPT

Accepted Answer

A)  choosing the size of the government deficit. 
B)  controlling the money supply. 
C)  setting government spending. 
D)  setting tax rates. 
A)  choosing the size of the government deficit. 
B)  controlling the money supply. 
C)  setting government spending. 
D)  setting tax rates.

Question 12

Fiscal policy includes

Accepted Answer

A)  only decisions related to government expenditure on goods and services and the value of transfer payments. 
B)  only decisions related to government expenditure on goods and services. 
C)  only decisions related to the value of transfer payments and tax revenue. 
D)  decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue. 
A)  only decisions related to government expenditure on goods and services and the value of transfer payments. 
B)  only decisions related to government expenditure on goods and services. 
C)  only decisions related to the value of transfer payments and tax revenue. 
D)  decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.

Question 13

If employment is less than full employment, what fiscal policy should the government pursue?

Accepted Answer

To restore full employment, th

Question 14

The aggregate demand curve is shifted rightward by an increase in tax rates.

Accepted Answer

A) True 
 B)False

Question 15

Deliberate changes in government expenditures and taxes to influence GDP are discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 16

The federal government debt is equal to the

Accepted Answer

A)  annual difference between federal government tax revenues and outlays. 
B)  obligations of benefits from federal taxes and expenditures. 
C)  sum of all annual federal government outlays. 
D)  sum of past budget deficits minus the sum of past budget surpluses. 
A)  annual difference between federal government tax revenues and outlays. 
B)  obligations of benefits from federal taxes and expenditures. 
C)  sum of all annual federal government outlays. 
D)  sum of past budget deficits minus the sum of past budget surpluses.

Question 17

The autonomous tax multiplier is

Accepted Answer

A)  larger than the government expenditure multiplier. 
B)  negative. 
C)  smaller than the government expenditure multiplier. 
D)  equal to the government expenditure multiplier. 
A)  larger than the government expenditure multiplier. 
B)  negative. 
C)  smaller than the government expenditure multiplier. 
D)  equal to the government expenditure multiplier.

Question 18

In 2009, the U.S. government budget registered a deficit. By definition, then,

Accepted Answer

A)  the government debt became negative. 
B)  tax revenues were less than government outlays. 
C)  tax revenues were equal to government outlays. 
D)  tax revenues were greater than government outlays. 
A)  the government debt became negative. 
B)  tax revenues were less than government outlays. 
C)  tax revenues were equal to government outlays. 
D)  tax revenues were greater than government outlays.

Question 19

-Consider the above table with data for a country's government budget. The data show the government is running a billion.

Accepted Answer

A)  budget surplus of $650 
B)  budget deficit of $375 
C)  budget deficit of $550 
D)  budget surplus of $300 
A)  budget surplus of $650 
B)  budget deficit of $375 
C)  budget deficit of $550 
D)  budget surplus of $300

Question 20

Which multiplier is largest in magnitude?

Accepted Answer

A)  autonomous tax multiplier 
B)  government expenditure multiplier 
C)  balanced budget multiplier 
D)  All the multipliers are the same size. 
A)  autonomous tax multiplier 
B)  government expenditure multiplier 
C)  balanced budget multiplier 
D)  All the multipliers are the same size.

An increase in taxes on labor income can decrease potential GDP.

The size of the government expenditure multiplier is by induced taxes and by needs- tested spending.

If we compare the United States to France, we see that potential GDP per person in France is Than that in the United States because the French tax wedge is than the U.S. tax wedge.

The structural deficit is that deficit that would exist

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

When real GDP is less than potential GDP, an increase in government expenditures will real GDP and _ the price level.

The government budget deficit tends to decline during the expansion phase of a business cycle because tax revenues _ and government transfer payments .

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 5?

What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a recession and during an expansion?

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

All of the following are part of fiscal policy EXCEPT

Fiscal policy includes

If employment is less than full employment, what fiscal policy should the government pursue?

The aggregate demand curve is shifted rightward by an increase in tax rates.

Deliberate changes in government expenditures and taxes to influence GDP are discretionary fiscal policy.

The federal government debt is equal to the

The autonomous tax multiplier is

In 2009, the U.S. government budget registered a deficit. By definition, then,

-Consider the above table with data for a country's government budget. The data show the government is running a billion.

Which multiplier is largest in magnitude?

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

An increase in taxes on labor income can decrease potential GDP.

The size of the government expenditure multiplier is by induced taxes and by needs- tested spending.

If we compare the United States to France, we see that potential GDP per person in France is Than that in the United States because the French tax wedge is than the U.S. tax wedge.

The structural deficit is that deficit that would exist

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

When real GDP is less than potential GDP, an increase in government expenditures will real GDP and _ the price level.

The government budget deficit tends to decline during the expansion phase of a business cycle because tax revenues _ and government transfer payments .

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 5?

What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a recession and during an expansion?

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

All of the following are part of fiscal policy EXCEPT

Fiscal policy includes

If employment is less than full employment, what fiscal policy should the government pursue?

The aggregate demand curve is shifted rightward by an increase in tax rates.

Deliberate changes in government expenditures and taxes to influence GDP are discretionary fiscal policy.

The federal government debt is equal to the

The autonomous tax multiplier is

In 2009, the U.S. government budget registered a deficit. By definition, then,

-Consider the above table with data for a country's government budget. The data show the government is running a billion.

Which multiplier is largest in magnitude?

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