Question 1

An increase in taxes on labor income shifts the labor supply curve and the .

Accepted Answer

A)  leftward; after-tax wage rate rises 
B)  rightward; before-tax wage rate rises 
C)  leftward; after-tax wage rate falls 
D)  rightward; before-tax wage rate falls 
A)  leftward; after-tax wage rate rises 
B)  rightward; before-tax wage rate rises 
C)  leftward; after-tax wage rate falls 
D)  rightward; before-tax wage rate falls

Question 2

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

Accepted Answer

A) True 
 B)False

Question 3

Social Security benefits and expenditures on Medicare and Medicaid are classified as

Accepted Answer

A)  debt interest. 
B)  production of goods and services. 
C)  purchases of goods and services. 
D)  transfer payments. 
A)  debt interest. 
B)  production of goods and services. 
C)  purchases of goods and services. 
D)  transfer payments.

Question 4

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $13 trillion. If real GDP is $13 trillion, then the government has a _________

Accepted Answer

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

Question 5

The structural surplus

Accepted Answer

A)  is, by definition, equal to the negative of the cyclical deficit. 
B)  equals the actual surplus plus the cyclical surplus. 
C)  is legally required to be positive. 
D)  is the government budget surplus that would exist if the economy was at potential GDP. 
A)  is, by definition, equal to the negative of the cyclical deficit. 
B)  equals the actual surplus plus the cyclical surplus. 
C)  is legally required to be positive. 
D)  is the government budget surplus that would exist if the economy was at potential GDP.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

An increase in taxes on interest income_________ supply of loanable funds curve and_________ the demand for loanable funds curve.

Accepted Answer

A)  does not shift; shifts 
B)  does not shift; does not shift 
C)  shifts; does not shift 
D)  shifts; shifts 
A)  does not shift; shifts 
B)  does not shift; does not shift 
C)  shifts; does not shift 
D)  shifts; shifts

Question 8

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

Question 9

Which of the following relationships is correct?

Accepted Answer

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

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The stimulus package passed by Congress in 2009 is an example of

Accepted Answer

A)  monetary policy 
B)  automatic fiscal policy 
C)  discretionary fiscal policy 
D)  increased taxation 
A)  monetary policy 
B)  automatic fiscal policy 
C)  discretionary fiscal policy 
D)  increased taxation

Question 13

If the government wants to engage in fiscal policy to increase real GDP, it could

Accepted Answer

A)  decrease government expenditure in order to increase short-run aggregate supply. 
B)  decrease government expenditure in order to decrease aggregate demand. 
C)  increase government expenditure in order to increase short-run aggregate supply. 
D)  increase government expenditure in order to increase aggregate demand. 
A)  decrease government expenditure in order to increase short-run aggregate supply. 
B)  decrease government expenditure in order to decrease aggregate demand. 
C)  increase government expenditure in order to increase short-run aggregate supply. 
D)  increase government expenditure in order to increase aggregate demand.

Question 14

-In the above figure, which of the following policies could move the economy to potential GDP?

Accepted Answer

A)  increasing government expenditures and decreasing taxes 
B)  decreasing government expenditures and increasing taxes 
C)  decreasing taxes and not changing government expenditures 
D)  None of the above answers is correct. 
A)  increasing government expenditures and decreasing taxes 
B)  decreasing government expenditures and increasing taxes 
C)  decreasing taxes and not changing government expenditures 
D)  None of the above answers is correct.

Question 15

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 4 by the government shown in the above table?

Accepted Answer

A)  $320 billion surplus 
B)  $5 billion surplus 
C)  $35 billion surplus 
D)  $20 billion deficit 
A)  $320 billion surplus 
B)  $5 billion surplus 
C)  $35 billion surplus 
D)  $20 billion deficit

Question 16

In 2008, Britain decided to cut its value added tax VAT) to 15 percent from 17.5 percent. The VAT is similar to a sales tax. According to the supply-side view, this change will increase
i. the after-tax wage
ii. the incentive to work
iii. the supply of labor

Accepted Answer

A)  ii and iii only. 
B)  i, ii and iii. 
C)  ii only. 
D)  i and ii only. 
A)  ii and iii only. 
B)  i, ii and iii. 
C)  ii only. 
D)  i and ii only.

Question 17

Taking account of the supply-side effects, a tax cut on labor income _________employment and_________ potential GDP.

Accepted Answer

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

Question 18

Tax revenues

Accepted Answer

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

Question 19

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

Accepted Answer

A)  the amount by which taxes change is affected by the MPC. 
B)  only part of the increase in disposable income from the tax cut is spent. 
C)  changes in government expenditure do not directly affect consumption. 
D)  tax rates are the same regardless of income levels. 
A)  the amount by which taxes change is affected by the MPC. 
B)  only part of the increase in disposable income from the tax cut is spent. 
C)  changes in government expenditure do not directly affect consumption. 
D)  tax rates are the same regardless of income levels.

Question 20

A decrease in the income tax rate

Accepted Answer

A)  increases the supply of labor. 
B)  increases the tax wedge. 
C)  decreases potential GDP. 
D)  decreases the demand for labor. 
A)  increases the supply of labor. 
B)  increases the tax wedge. 
C)  decreases potential GDP. 
D)  decreases the demand for labor.

An increase in taxes on labor income shifts the labor supply curve and the .

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

Social Security benefits and expenditures on Medicare and Medicaid are classified as

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $13 trillion. If real GDP is $13 trillion, then the government has a _________

The structural surplus

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

An increase in taxes on interest income_ supply of loanable funds curve and_ the demand for loanable funds curve.

The budget process includes the

Which of the following relationships is correct?

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

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

The stimulus package passed by Congress in 2009 is an example of

If the government wants to engage in fiscal policy to increase real GDP, it could

-In the above figure, which of the following policies could move the economy to potential GDP?

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 4 by the government shown in the above table?

In 2008, Britain decided to cut its value added tax VAT) to 15 percent from 17.5 percent. The VAT is similar to a sales tax. According to the supply-side view, this change will increase i. the after-tax wage ii. the incentive to work iii. the supply of labor

Taking account of the supply-side effects, a tax cut on labor income _employment and_ potential GDP.

Tax revenues

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

A decrease in the income tax rate

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

An increase in taxes on labor income shifts the labor supply curve and the .

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

Social Security benefits and expenditures on Medicare and Medicaid are classified as

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $13 trillion. If real GDP is $13 trillion, then the government has a _________

The structural surplus

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

An increase in taxes on interest income_________ supply of loanable funds curve and_________ the demand for loanable funds curve.

The budget process includes the

Which of the following relationships is correct?

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

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

The stimulus package passed by Congress in 2009 is an example of

If the government wants to engage in fiscal policy to increase real GDP, it could

-In the above figure, which of the following policies could move the economy to potential GDP?

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 4 by the government shown in the above table?

In 2008, Britain decided to cut its value added tax VAT) to 15 percent from 17.5 percent. The VAT is similar to a sales tax. According to the supply-side view, this change will increase i. the after-tax wage ii. the incentive to work iii. the supply of labor

Taking account of the supply-side effects, a tax cut on labor income _________employment and_________ potential GDP.

Tax revenues

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

A decrease in the income tax rate

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

An increase in taxes on interest income_ supply of loanable funds curve and_ the demand for loanable funds curve.

Taking account of the supply-side effects, a tax cut on labor income _employment and_ potential GDP.