Question 1

An increase in taxes on labor income decreases potential GDP.

Accepted Answer

A) True 
 B)False

Question 2

By definition, a government budget deficit is the situation that occurs when the

Accepted Answer

A)  government spends money on things which do not produce revenue, such as schools. 
B)  government miscalculated how much it will receive in taxes. 
C)  economy goes into a recession. 
D)  government outlays exceed what it receives in taxes. 
A)  government spends money on things which do not produce revenue, such as schools. 
B)  government miscalculated how much it will receive in taxes. 
C)  economy goes into a recession. 
D)  government outlays exceed what it receives in taxes.

Question 3

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

Accepted Answer

A)  3 percent. 
B)  $343.92. 
C)  $1,343.92. 
D)  $1,000. 
A)  3 percent. 
B)  $343.92. 
C)  $1,343.92. 
D)  $1,000.

Question 4

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

Accepted Answer

A)  there will be an increase in potential GDP due to the increase tax revenue. 
B)  the incentive to work increases. 
C)  the supply of labor increases. 
D)  the after-tax wage rate falls. 
A)  there will be an increase in potential GDP due to the increase tax revenue. 
B)  the incentive to work increases. 
C)  the supply of labor increases. 
D)  the after-tax wage rate falls.

Question 5

In order for the United States to repay its international debt, the United States would need to

Accepted Answer

A)  have a current account deficit. 
B)  have a surplus of exports over imports. 
C)  cut taxes. 
D)  have a surplus of imports over exports. 
A)  have a current account deficit. 
B)  have a surplus of exports over imports. 
C)  cut taxes. 
D)  have a surplus of imports over exports.

Question 6

Between 2000 and 2005, Finland increased its tax on interest income. As a result, the tax wedge____________and the growth rate of real GDP____________ .

Accepted Answer

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

Question 7

Discretionary policy requires an act of Congress.

Accepted Answer

A) True 
 B)False

Question 8

According to tax receipt and outlay categories, what are the main components of the federal government budget?

Accepted Answer

The budget is divided between the tax re

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

-In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point

Accepted Answer

A)  B. 
B)  A, that is, the equilibrium will NOT  change. 
C)  C. 
D)  None of the above answers is correct. 
A)  B. 
B)  A, that is, the equilibrium will NOT  change. 
C)  C. 
D)  None of the above answers is correct.

Question 11

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

Question 12

Which of the following policies shifts the AD curve the farthest leftward?

Accepted Answer

A)  a decrease in government expenditure of $10 billion 
B)  a cut in taxes of $10 billion 
C)  a decrease in both government expenditure and taxes of $10 billion 
D)  a rise in taxes of $10 billion 
A)  a decrease in government expenditure of $10 billion 
B)  a cut in taxes of $10 billion 
C)  a decrease in both government expenditure and taxes of $10 billion 
D)  a rise in taxes of $10 billion

Question 13

Automatic fiscal policy is not subject to all the same time lags to which discretionary fiscal policy is subject.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full-employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the governmentʹs fiscal policy,

Accepted Answer

A)  potential GDP decreases. 
B)  aggregate demand will increase. 
C)  an equilibrium with real GDP less than potential GDP will occur. 
D)  None of the above answers is correct.. 
A)  potential GDP decreases. 
B)  aggregate demand will increase. 
C)  an equilibrium with real GDP less than potential GDP will occur. 
D)  None of the above answers is correct..

Question 15

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

Accepted Answer

A inflationary gap occurs when real GDP

Question 16

The aggregate demand curve is shifted rightward by an increase in government expenditure.

Accepted Answer

A) True 
 B)False

Question 17

An increase in taxes on labor income _________the labor supply curve and _________the labor demand curve..

Accepted Answer

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

Question 18

Splitting the fiscal imbalance between current and future generations is called

Accepted Answer

A)  actuarial balance. 
B)  actuarial accounting. 
C)  generational imbalance. 
D)  genealogical accounting. 
A)  actuarial balance. 
B)  actuarial accounting. 
C)  generational imbalance. 
D)  genealogical accounting.

Question 19

The purpose of the Employment Act of 1946 was to

Accepted Answer

A)  establish an unemployment compensation system. 
B)  establish goals for the federal government that would promote maximum employment, purchasing power, and production. 
C)  set up the Federal Reserve System. 
D)  set targets for the unemployment rate to be achieved by the president. 
A)  establish an unemployment compensation system. 
B)  establish goals for the federal government that would promote maximum employment, purchasing power, and production. 
C)  set up the Federal Reserve System. 
D)  set targets for the unemployment rate to be achieved by the president.

Question 20

The Employment Act of 1946 made it the responsibility of the federal government to

Accepted Answer

A)  improve the distribution of income. 
B)  promote maximum employment. 
C)  balance its budget because that policy would create the maximum level of employment. 
D)  provide full employment and a stable balance of payments. 
A)  improve the distribution of income. 
B)  promote maximum employment. 
C)  balance its budget because that policy would create the maximum level of employment. 
D)  provide full employment and a stable balance of payments.

An increase in taxes on labor income decreases potential GDP.

By definition, a government budget deficit is the situation that occurs when the

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

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

In order for the United States to repay its international debt, the United States would need to

Between 2000 and 2005, Finland increased its tax on interest income. As a result, the tax wedgeand the growth rate of real GDP .

Discretionary policy requires an act of Congress.

According to tax receipt and outlay categories, what are the main components of the federal government budget?

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

-In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point

-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

Which of the following policies shifts the AD curve the farthest leftward?

Automatic fiscal policy is not subject to all the same time lags to which discretionary fiscal policy is subject.

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full-employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the governmentʹs fiscal policy,

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

The aggregate demand curve is shifted rightward by an increase in government expenditure.

An increase in taxes on labor income _the labor supply curve and _the labor demand curve..

Splitting the fiscal imbalance between current and future generations is called

The purpose of the Employment Act of 1946 was to

The Employment Act of 1946 made it the responsibility of the federal government to

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 decreases potential GDP.

By definition, a government budget deficit is the situation that occurs when the

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

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

In order for the United States to repay its international debt, the United States would need to

Between 2000 and 2005, Finland increased its tax on interest income. As a result, the tax wedge____________and the growth rate of real GDP____________ .

Discretionary policy requires an act of Congress.

According to tax receipt and outlay categories, what are the main components of the federal government budget?

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

-In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point

-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

Which of the following policies shifts the AD curve the farthest leftward?

Automatic fiscal policy is not subject to all the same time lags to which discretionary fiscal policy is subject.

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full-employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the governmentʹs fiscal policy,

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

The aggregate demand curve is shifted rightward by an increase in government expenditure.

An increase in taxes on labor income _________the labor supply curve and _________the labor demand curve..

Splitting the fiscal imbalance between current and future generations is called

The purpose of the Employment Act of 1946 was to

The Employment Act of 1946 made it the responsibility of the federal government to

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

Between 2000 and 2005, Finland increased its tax on interest income. As a result, the tax wedgeand the growth rate of real GDP .

An increase in taxes on labor income _the labor supply curve and _the labor demand curve..