Question 1

During a recession, revenues

Accepted Answer

A) increase and government outlays decrease. 
B) decrease and government outlays increase. 
C) and government outlays increase. 
D) remain constant and government outlays increase. 
E) and government outlays decrease. 
A) increase and government outlays decrease. 
B) decrease and government outlays increase. 
C) and government outlays increase. 
D) remain constant and government outlays increase. 
E) and government outlays decrease.

Question 2

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.Discretionary fiscal policy would be shown as a movement

Accepted Answer

A) from left to right along the revenues curve. 
B) from right to left along the revenues curve. 
C) from left to right along the outlays curve. 
D) from right to left along the outlays curve. 
E) none of the above 
A) from left to right along the revenues curve. 
B) from right to left along the revenues curve. 
C) from left to right along the outlays curve. 
D) from right to left along the outlays curve. 
E) none of the above

Question 3

Discretionary fiscal policy

Accepted Answer

A) requires action by Parliament. 
B) is triggered by the state of the economy. 
C) occurs during recessions but not during expansions. 
D) involves only a change in government outlays and no change in revenues. 
E) involves only a change in personal income tax rates. 
A) requires action by Parliament. 
B) is triggered by the state of the economy. 
C) occurs during recessions but not during expansions. 
D) involves only a change in government outlays and no change in revenues. 
E) involves only a change in personal income tax rates.

Question 4

In 2016, Canada had

Accepted Answer

A) a structural surplus and a cyclical deficit. 
B) a balanced structural budget and a cyclical deficit. 
C) a structural surplus and a cyclical surplus. 
D) a structural deficit and a cyclical surplus. 
E) a structural deficit and a cyclical deficit. 
A) a structural surplus and a cyclical deficit. 
B) a balanced structural budget and a cyclical deficit. 
C) a structural surplus and a cyclical surplus. 
D) a structural deficit and a cyclical surplus. 
E) a structural deficit and a cyclical deficit.

Question 5

The government is proposing to increase the tax rate on labour income and asks you to report on the supply- side effects of such an action.According to the research of Edward C.Prescott, cross- country evidence for Canada, the United States, the United Kingdom, and France shows all of the following except

Accepted Answer

A) between Canada, the United States, France, and the United Kingdom, the tax wedge is greatest in the United Kingdom, and the country with the smallest tax wedge has the smallest potential GDP. 
B) potential GDP per person in Canada is 12 percent below that of the United States but this difference is due to different productivities. 
C) potential GDP per person in the United Kingdom is 28 percent below that of the United States per person)and about a third of the difference arises from the different tax wedges. 
D) the greater the tax wedge, the smaller the level of employment and the smaller the potential GDP. 
E) potential GDP per person in France is 30 percent below that of the United States per person)and the entire difference can be attributed to the difference in the tax wedge in the two countries. 
A) between Canada, the United States, France, and the United Kingdom, the tax wedge is greatest in the United Kingdom, and the country with the smallest tax wedge has the smallest potential GDP. 
B) potential GDP per person in Canada is 12 percent below that of the United States but this difference is due to different productivities. 
C) potential GDP per person in the United Kingdom is 28 percent below that of the United States per person)and about a third of the difference arises from the different tax wedges. 
D) the greater the tax wedge, the smaller the level of employment and the smaller the potential GDP. 
E) potential GDP per person in France is 30 percent below that of the United States per person)and the entire difference can be attributed to the difference in the tax wedge in the two countries.

Question 6

The use of fiscal policy is limited because

Accepted Answer

A) of impact lag. 
B) of law- making lag. 
C) of recognition lag. 
D) all of the above 
E) none of the above 
A) of impact lag. 
B) of law- making lag. 
C) of recognition lag. 
D) all of the above 
E) none of the above

Question 7

Suppose the government starts with a debt of $0.Then in year 1, there is a deficit of $100 billion, in year 2 there is a deficit of $60 billion, in year 3 there is a surplus of $40 billion, and in year 4 there is a deficit of $20 billion.What is government debt at the end of year 4?

Accepted Answer

A) $180 billion 
B) $140 billion 
C) $20 billion 
D) somewhat greater than $220 billion, depending on the interest rate 
E) somewhat greater than $140 billion, depending on the interest rate 
A) $180 billion 
B) $140 billion 
C) $20 billion 
D) somewhat greater than $220 billion, depending on the interest rate 
E) somewhat greater than $140 billion, depending on the interest rate

Question 8

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion.The government budget _______ the supply of loanable funds, which _______ the real interest rate and _______ investment.

Accepted Answer

A) surplus decreases; raises; increases 
B) surplus increases; lowers; decreases 
C) deficit decreases; raises; decreases 
D) surplus increases; lowers; increases 
E) surplus increases; raises; decreases 
A) surplus decreases; raises; increases 
B) surplus increases; lowers; decreases 
C) deficit decreases; raises; decreases 
D) surplus increases; lowers; increases 
E) surplus increases; raises; decreases

Question 9

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion._______ in government expenditure or _______ in taxes will further increase China's budget _______, increase investment and speed economic growth.

Accepted Answer

A) A decrease; an increase; surplus 
B) A decrease; an increase; deficit 
C) An increase; an increase; surplus 
D) A decrease; a decrease; deficit 
E) An increase; a decreases; deficit 
A) A decrease; an increase; surplus 
B) A decrease; an increase; deficit 
C) An increase; an increase; surplus 
D) A decrease; a decrease; deficit 
E) An increase; a decreases; deficit

Question 10

The Laffer curve is the relationship between

Accepted Answer

A) government outlays and revenues. 
B) government expenditure and potential GDP. 
C) tax revenue and potential GDP. 
D) the tax rate and the amount of tax revenue. 
E) the tax rate and potential GDP. 
A) government outlays and revenues. 
B) government expenditure and potential GDP. 
C) tax revenue and potential GDP. 
D) the tax rate and the amount of tax revenue. 
E) the tax rate and potential GDP.

Question 11

The economy is in a recession and the recessionary gap is large.A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal

Accepted Answer

A) increase in transfer payments and decrease in the quantity of money. 
B) increase in transfer payments and a decrease in taxes. 
C) decrease in government expenditure and taxes. 
D) increase in government expenditure and an increase in taxes. 
E) decrease in transfer payments and increase in the quantity of money. 
A) increase in transfer payments and decrease in the quantity of money. 
B) increase in transfer payments and a decrease in taxes. 
C) decrease in government expenditure and taxes. 
D) increase in government expenditure and an increase in taxes. 
E) decrease in transfer payments and increase in the quantity of money.

Question 12

Currently the government of Ricardia has outlays equal to $100 billion, and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1real GDP).What is the real GDP when the government has a balanced budget?

Accepted Answer

A) $250 
B) $1,250 billion 
C) $750 billion 
D) $100 
E) $1,000 billion 
A) $250 
B) $1,250 billion 
C) $750 billion 
D) $100 
E) $1,000 billion

Question 13

If the economy is in a recession, and the government has a budget deficit, then there

Accepted Answer

A) may be a structural surplus, but not a structural deficit. 
B) may be either a structural surplus or deficit. 
C) may be a structural deficit, but not a structural surplus. 
D) must be a structural deficit. 
E) must be a structural surplus. 
A) may be a structural surplus, but not a structural deficit. 
B) may be either a structural surplus or deficit. 
C) may be a structural deficit, but not a structural surplus. 
D) must be a structural deficit. 
E) must be a structural surplus.

Question 14

If the economy is in an expansion, and the federal government is running a deficit, then a recession would automatically

Accepted Answer

A) increase taxes. 
B) decrease the deficit. 
C) increase government outlays. 
D) increase the deficit. 
E) both C and D 
A) increase taxes. 
B) decrease the deficit. 
C) increase government outlays. 
D) increase the deficit. 
E) both C and D

Question 15

A tax on interest income

Accepted Answer

A) decreases the supply of loanable funds and has no influence on the real interest rate. 
B) increases the demand for loanable funds and raises the real interest rate. 
C) increases the supply of loanable funds and lowers the real interest rate. 
D) has no effect on the demand for loanable funds. 
E) decreases the demand for loanable funds but does not change the real interest rate. 
A) decreases the supply of loanable funds and has no influence on the real interest rate. 
B) increases the demand for loanable funds and raises the real interest rate. 
C) increases the supply of loanable funds and lowers the real interest rate. 
D) has no effect on the demand for loanable funds. 
E) decreases the demand for loanable funds but does not change the real interest rate.

Question 16

The Laffer curve shows that increasing _______ increases _______ when _______ low.

Accepted Answer

A) government outlays; the budget deficit; government expenditure is 
B) potential GDP; tax revenue; tax revenue is 
C) the tax rate; potential GDP; the interest rate is 
D) the tax rate; tax revenue; the tax rate is 
E) tax revenue; potential GDP; tax revenue is 
A) government outlays; the budget deficit; government expenditure is 
B) potential GDP; tax revenue; tax revenue is 
C) the tax rate; potential GDP; the interest rate is 
D) the tax rate; tax revenue; the tax rate is 
E) tax revenue; potential GDP; tax revenue is

Question 17

If the nominal interest rate is 11%, the inflation rate is 4% and the tax rate is 25%, what is the real after- tax interest rate?

Accepted Answer

A) 5.25 percent 
B) 4.25 percent 
C) 8 percent 
D) - 1.25 percent 
E) 10 percent 
A) 5.25 percent 
B) 4.25 percent 
C) 8 percent 
D) - 1.25 percent 
E) 10 percent

Question 18

Choose the correct statement.

Accepted Answer

A) Tax cuts increase aggregate supply and aggregate demand. 
B) Tax cuts strengthen the incentive to work and to invest. 
C) The tax multiplier becomes smaller as time passes. 
D) According to Barro and Uhlig, tax cuts are a less powerful way to stimulate real GDP than spending increases. 
E) Both A and B are correct. 
A) Tax cuts increase aggregate supply and aggregate demand. 
B) Tax cuts strengthen the incentive to work and to invest. 
C) The tax multiplier becomes smaller as time passes. 
D) According to Barro and Uhlig, tax cuts are a less powerful way to stimulate real GDP than spending increases. 
E) Both A and B are correct.

Question 19

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

Accepted Answer

A) equal to the structural deficit. 
B) $180 billion. 
C) $60 billion. 
D) $40 billion. 
E) zero. 
A) equal to the structural deficit. 
B) $180 billion. 
C) $60 billion. 
D) $40 billion. 
E) zero.

Question 20

The category of federal government revenues that fluctuates the most is

Accepted Answer

A) personal income taxes. 
B) debt interest. 
C) indirect taxes. 
D) transfer payments. 
E) investment income. 
A) personal income taxes. 
B) debt interest. 
C) indirect taxes. 
D) transfer payments. 
E) investment income.

During a recession, revenues

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.Discretionary fiscal policy would be shown as a movement

Discretionary fiscal policy

In 2016, Canada had

The use of fiscal policy is limited because

Suppose the government starts with a debt of $0.Then in year 1, there is a deficit of $100 billion, in year 2 there is a deficit of $60 billion, in year 3 there is a surplus of $40 billion, and in year 4 there is a deficit of $20 billion.What is government debt at the end of year 4?

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion.The government budget ___ the supply of loanable funds, which _ the real interest rate and _____ investment.

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion.___ in government expenditure or _ in taxes will further increase China's budget _____, increase investment and speed economic growth.

The Laffer curve is the relationship between

The economy is in a recession and the recessionary gap is large.A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal

Currently the government of Ricardia has outlays equal to $100 billion, and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1real GDP).What is the real GDP when the government has a balanced budget?

If the economy is in a recession, and the government has a budget deficit, then there

If the economy is in an expansion, and the federal government is running a deficit, then a recession would automatically

A tax on interest income

The Laffer curve shows that increasing ___ increases _ when _____ low.

If the nominal interest rate is 11%, the inflation rate is 4% and the tax rate is 25%, what is the real after- tax interest rate?

Choose the correct statement.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

The category of federal government revenues that fluctuates the most is

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 Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

During a recession, revenues

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.Discretionary fiscal policy would be shown as a movement

Discretionary fiscal policy

In 2016, Canada had

The use of fiscal policy is limited because

Suppose the government starts with a debt of $0.Then in year 1, there is a deficit of $100 billion, in year 2 there is a deficit of $60 billion, in year 3 there is a surplus of $40 billion, and in year 4 there is a deficit of $20 billion.What is government debt at the end of year 4?

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion.The government budget _______ the supply of loanable funds, which _______ the real interest rate and _______ investment.

The Laffer curve is the relationship between

The economy is in a recession and the recessionary gap is large.A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal

Currently the government of Ricardia has outlays equal to $100 billion, and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1real GDP).What is the real GDP when the government has a balanced budget?

If the economy is in a recession, and the government has a budget deficit, then there

If the economy is in an expansion, and the federal government is running a deficit, then a recession would automatically

A tax on interest income

The Laffer curve shows that increasing _______ increases _______ when _______ low.

If the nominal interest rate is 11%, the inflation rate is 4% and the tax rate is 25%, what is the real after- tax interest rate?

Choose the correct statement.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

The category of federal government revenues that fluctuates the most is

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 Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Suppose that in China, investment is ¥400 billion, saving is ¥400 billion, tax revenues are ¥500 billion, exports are ¥300 billion, and imports are ¥200 billion.The government budget ___ the supply of loanable funds, which _ the real interest rate and _____ investment.

The Laffer curve shows that increasing ___ increases _ when _____ low.