Question 1

In 2007, Germany increased the value added tax VAT) on consumption from 16 percent to 19 percent. The supply-side view, this will ____________.

Accepted Answer

A)  shift the labor supply curve to the right. 
B)  decrease the tax wedge and lower the incentive to work. 
C)  increase the incentive to work in order to pay the higher tax. 
D)  increase the tax wedge and lower the incentive to work. 
A)  shift the labor supply curve to the right. 
B)  decrease the tax wedge and lower the incentive to work. 
C)  increase the incentive to work in order to pay the higher tax. 
D)  increase the tax wedge and lower the incentive to work.

Question 2

The structural deficit is that deficit that would exist

Accepted Answer

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

Question 3

All of the following are government outlays  EXCEPT

Accepted Answer

A)  interest on the governmentʹs debt. 
B)  purchases of corporate bonds. 
C)  transfer payments. 
D)  expenditure on goods and services. 
A)  interest on the governmentʹs debt. 
B)  purchases of corporate bonds. 
C)  transfer payments. 
D)  expenditure on goods and services.

Question 4

What is the government expenditure multiplier?

Accepted Answer

The government expenditure multiplier is

Question 5

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

Question 6

Expenditures such as Social Security benefits, farm subsidies and grants are considered

Accepted Answer

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

Question 7

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

Accepted Answer

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

Question 8

Prior to the Great Depression, the purpose of the federal budget was to __________.

Accepted Answer

A)  finance the activities of the government 
B)  decrease unemployment 
C)  maintain low interest rates 
D)  stabilize the economy 
A)  finance the activities of the government 
B)  decrease unemployment 
C)  maintain low interest rates 
D)  stabilize the economy

Question 9

One characteristic of automatic fiscal policy is that it

Accepted Answer

A)  reduces the size of the federal government debt during times of recession. 
B)  has no effect on unemployment. 
C)  automatically produces surpluses during recessions and deficits during inflation. 
D)  requires no legislative action by Congress to be made effective. 
A)  reduces the size of the federal government debt during times of recession. 
B)  has no effect on unemployment. 
C)  automatically produces surpluses during recessions and deficits during inflation. 
D)  requires no legislative action by Congress to be made effective.

Question 10

In the short run, an increase in government expenditure will
I. shift the aggregate demand curve rightward.
II. increase real GDP.
III. increase the government expenditure multiplier.
IV. increase the tax multiplier.

Accepted Answer

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

Question 11

Suppose that the government decreases its expenditures on goods and services. Within the AS-AD Model, the result will be in real GDP and in the price level.

Accepted Answer

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

Question 12

Automatic fiscal policy is at work if, as real GDP increases, _________.

Accepted Answer

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

Question 13

The U.S. federal budget over the past 30 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.

Question 14

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

Accepted Answer

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

Question 15

The Laffer curve shows that increasing_________ increases _________when _________low.

Accepted Answer

A)  tax revenue; potential GDP; tax revenue is 
B)  potential GDP; tax revenue; tax revenue is 
C)  tax rates; tax revenue; tax rates are 
D)  None of the above answers is correct. 
A)  tax revenue; potential GDP; tax revenue is 
B)  potential GDP; tax revenue; tax revenue is 
C)  tax rates; tax revenue; tax rates are 
D)  None of the above answers is correct.

Question 16

ʺEuropean Economic Recovery Planʺ
ʺThe European Commission urged EU governments to jointly combat the economic slowdown with 200 billion euros $256 billion) in spending and tax cuts to boost growth and consumer and business confidence.ʺ The plan ʺ...would see the 27 EU governments spend 1.5 percent of the blocʹs gross domestic product to halt the slowdown that has already pushed some European nations into recession.ʺ
The plan is expected to

Accepted Answer

A)  use the autonomous tax multiplier to eliminate the inflationary gap. 
B)  shift the AD curve rightward and increase real GDP. 
C)  decrease the recessionary gap and decrease the price level. 
D)  shift the AD curve leftward and decrease the recessionary gap. 
A)  use the autonomous tax multiplier to eliminate the inflationary gap. 
B)  shift the AD curve rightward and increase real GDP. 
C)  decrease the recessionary gap and decrease the price level. 
D)  shift the AD curve leftward and decrease the recessionary gap.

Question 17

Which of the following is NOT    a government outlay?

Accepted Answer

A)  debt interest on the governmentʹs debt 
B)  purchases of foreign bonds 
C)  transfer payments 
D)  expenditure on goods and services 
A)  debt interest on the governmentʹs debt 
B)  purchases of foreign bonds 
C)  transfer payments 
D)  expenditure on goods and services

Question 18

In response to the economic downturn, New Zealandʹs government had enacted a $3.8 stimulus package.
The stimulus plan is considered

Accepted Answer

A)  automatic fiscal policy. 
B)  discretionary fiscal policy. 
C)  needs-tested spending. 
D)  contractionary fiscal policy. 
A)  automatic fiscal policy. 
B)  discretionary fiscal policy. 
C)  needs-tested spending. 
D)  contractionary fiscal policy.

Question 19

What is the Laffer curve? Where on their Laffer curves are the United States, the United Kingdom and France located?

Accepted Answer

The Laffer curve is graphed with tax rev

Question 20

A fiscal action that is initiated by an act of Congress is called

Accepted Answer

A)  automatic fiscal policy. 
B)  the government expenditure multiplier. 
C)  generational fiscal policy. 
D)  discretionary fiscal policy. 
A)  automatic fiscal policy. 
B)  the government expenditure multiplier. 
C)  generational fiscal policy. 
D)  discretionary fiscal policy.

In 2007, Germany increased the value added tax VAT) on consumption from 16 percent to 19 percent. The supply-side view, this will ____________.

The structural deficit is that deficit that would exist

All of the following are government outlays EXCEPT

What is the government expenditure multiplier?

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?

Expenditures such as Social Security benefits, farm subsidies and grants are considered

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

Prior to the Great Depression, the purpose of the federal budget was to __________.

One characteristic of automatic fiscal policy is that it

In the short run, an increase in government expenditure will I. shift the aggregate demand curve rightward. II. increase real GDP. III. increase the government expenditure multiplier. IV. increase the tax multiplier.

Suppose that the government decreases its expenditures on goods and services. Within the AS-AD Model, the result will be in real GDP and in the price level.

Automatic fiscal policy is at work if, as real GDP increases, _________.

The U.S. federal budget over the past 30 years has been

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

The Laffer curve shows that increasing_____ increases _when _____low.

Which of the following is NOT a government outlay?

In response to the economic downturn, New Zealandʹs government had enacted a $3.8 stimulus package. The stimulus plan is considered

What is the Laffer curve? Where on their Laffer curves are the United States, the United Kingdom and France located?

A fiscal action that is initiated by an act of Congress is 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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Review

Filters

Exam 13: Fiscal Policy

In 2007, Germany increased the value added tax VAT) on consumption from 16 percent to 19 percent. The supply-side view, this will ____________.

The structural deficit is that deficit that would exist

All of the following are government outlays EXCEPT

What is the government expenditure multiplier?

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?

Expenditures such as Social Security benefits, farm subsidies and grants are considered

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

Prior to the Great Depression, the purpose of the federal budget was to __________.

One characteristic of automatic fiscal policy is that it

In the short run, an increase in government expenditure will I. shift the aggregate demand curve rightward. II. increase real GDP. III. increase the government expenditure multiplier. IV. increase the tax multiplier.

Suppose that the government decreases its expenditures on goods and services. Within the AS-AD Model, the result will be in real GDP and in the price level.

Automatic fiscal policy is at work if, as real GDP increases, _________.

The U.S. federal budget over the past 30 years has been

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

The Laffer curve shows that increasing_________ increases _________when _________low.

Which of the following is NOT a government outlay?

In response to the economic downturn, New Zealandʹs government had enacted a $3.8 stimulus package. The stimulus plan is considered

What is the Laffer curve? Where on their Laffer curves are the United States, the United Kingdom and France located?

A fiscal action that is initiated by an act of Congress is 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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Review

Filters

The Laffer curve shows that increasing_____ increases _when _____low.