Question 1

Do policy makers know the level of unemployment that is associated with "full employment"?

Accepted Answer

A)  Yes,economists have the precise level of unemployment that is full employment. 
B)  Yes,although there is a small range of uncertainty in this measure. 
C)  No,economists have no idea what this level of unemployment is. 
D)  No,this number is not known with complete accuracy. 
A)  Yes,economists have the precise level of unemployment that is full employment. 
B)  Yes,although there is a small range of uncertainty in this measure. 
C)  No,economists have no idea what this level of unemployment is. 
D)  No,this number is not known with complete accuracy.

Question 2

Suppose that the U.S.personal income tax was eliminated and replaced with a fixed tax that raised the exact same amount of revenue.The multiplier would be

Accepted Answer

A)  larger. 
B)  unchanged. 
C)  smaller. 
D)  incalculable. 
A)  larger. 
B)  unchanged. 
C)  smaller. 
D)  incalculable.

Question 3

The oversimplified formula for the multiplier is misleading because it ignores the effects of

Accepted Answer

A)  price-level changes. 
B)  the foreign sector. 
C)  variable taxes. 
D)  All of the above are correct. 
A)  price-level changes. 
B)  the foreign sector. 
C)  variable taxes. 
D)  All of the above are correct.

Question 4

The macroeconomic policy planner's job is made difficult because of

Accepted Answer

A)  inaccurate multiplier estimates. 
B)  timing problems. 
C)  disagreements over potential GDP. 
D)  uncertain forecasts. 
E)  All of the above are correct. 
A)  inaccurate multiplier estimates. 
B)  timing problems. 
C)  disagreements over potential GDP. 
D)  uncertain forecasts. 
E)  All of the above are correct.

Question 5

Fiscal policy is the use of taxes and spending by the government to affect aggregate demand.

Accepted Answer

A) True 
 B)False

Question 6

In 2006 and 2007 the U.S.faced an inflationary gap which would suggest the use of restrictive fiscal policy.

Accepted Answer

A) True 
 B)False

Question 7

Tax cuts associated with supply-side economics often lead to increased

Accepted Answer

A)  federal budget surpluses. 
B)  federal budget deficits. 
C)  foreign trade surpluses. 
D)  government spending. 
A)  federal budget surpluses. 
B)  federal budget deficits. 
C)  foreign trade surpluses. 
D)  government spending.

Question 8

In order to maintain a balanced budget,Congress has decided to cut taxes and government spending both by $25 billion.What will happen to GDP?

Accepted Answer

A)  It will increase. 
B)  It will remain the same. 
C)  It will decrease. 
D)  It's impossible to know without the multiplier. 
A)  It will increase. 
B)  It will remain the same. 
C)  It will decrease. 
D)  It's impossible to know without the multiplier.

Question 9

If the economy experiences an unplanned inventory accumulation at the full employment level of GDP,then the economy is in a(n)

Accepted Answer

A)  inflationary gap. 
B)  hyperinflation. 
C)  recessionary gap. 
D)  full employment gap. 
A)  inflationary gap. 
B)  hyperinflation. 
C)  recessionary gap. 
D)  full employment gap.

Question 10

Critics of supply-side economics argue that

Accepted Answer

A)  tax cuts do not affect supply,only demand. 
B)  supply-siders exaggerate the effects of tax cuts. 
C)  incentives have no effect on behavior. 
D)  the goals of supply-siders are not supported by most economists. 
A)  tax cuts do not affect supply,only demand. 
B)  supply-siders exaggerate the effects of tax cuts. 
C)  incentives have no effect on behavior. 
D)  the goals of supply-siders are not supported by most economists.

Question 11

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

Accepted Answer

Conservatives tend to want a smaller gov

Question 12

The president wishes to increase spending for education by $4 billion but also maintain a balanced budget.Therefore,taxes will also be increased by $4 billion.What will happen to GDP?

Accepted Answer

A)  It will increase. 
B)  It will remain the same. 
C)  It will decrease. 
D)  It's impossible to know without the multiplier. 
A)  It will increase. 
B)  It will remain the same. 
C)  It will decrease. 
D)  It's impossible to know without the multiplier.

Question 13

The government's fiscal policy is its plan to influence aggregate demand by changing

Accepted Answer

A)  the money supply. 
B)  minimum wage levels. 
C)  sales taxes. 
D)  taxation and spending. 
A)  the money supply. 
B)  minimum wage levels. 
C)  sales taxes. 
D)  taxation and spending.

Question 14

"Fiscal Policy" is the federal government's plan for

Accepted Answer

A)  international trade,designed to balance exports and imports. 
B)  spending and taxes,designed to influence the level of aggregate demand. 
C)  manipulating the money supply and the control of interest rates. 
D)  All of the above are correct. 
A)  international trade,designed to balance exports and imports. 
B)  spending and taxes,designed to influence the level of aggregate demand. 
C)  manipulating the money supply and the control of interest rates. 
D)  All of the above are correct.

Question 15

The Bush tax cuts

Accepted Answer

A)  reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B)  reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C)  reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D)  held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E)  Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
A)  reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B)  reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C)  reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D)  held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E)  Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers.

Question 16

Figure 11-3  
-Refer to Table 11-1.What is the level of consumption in this model?

Accepted Answer

A)  2,950 
B)  2,750 
C)  2,550 
D)  2,350 
E)  2,150 
A)  2,950 
B)  2,750 
C)  2,550 
D)  2,350 
E)  2,150

Question 17

A change in a fixed tax will cause the consumption schedule to

Accepted Answer

A)  become steeper. 
B)  become flatter. 
C)  shift in a parallel manner. 
D)  remain fixed as the economy moves along the schedule. 
A)  become steeper. 
B)  become flatter. 
C)  shift in a parallel manner. 
D)  remain fixed as the economy moves along the schedule.

Question 18

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Accepted Answer

A)  "There must be a constant philosophical prejudice against any intervention by the state into our lives,for by definition such intervention abridges liberty."-William Simon 
B)  "The bastards [read politicians] can't spend what they don't have."-Howard Jarvis 
C)  "The family that takes its mauve and cerise,air-conditioned,power-steered,power-braked automobile through cities that are badly paved,made hideous by litter,[and] blighted buildings...to picnic beside a polluted stream amid the stench of refuse may properly reflect on the curious unevenness of their blessings."-J.K.Galbraith 
D)  "Public expenditures are made for the primary benefit of the middle class and financed with taxes on the poor and rich."-Director's Law 
A)  "There must be a constant philosophical prejudice against any intervention by the state into our lives,for by definition such intervention abridges liberty."-William Simon 
B)  "The bastards [read politicians] can't spend what they don't have."-Howard Jarvis 
C)  "The family that takes its mauve and cerise,air-conditioned,power-steered,power-braked automobile through cities that are badly paved,made hideous by litter,[and] blighted buildings...to picnic beside a polluted stream amid the stench of refuse may properly reflect on the curious unevenness of their blessings."-J.K.Galbraith 
D)  "Public expenditures are made for the primary benefit of the middle class and financed with taxes on the poor and rich."-Director's Law

Question 19

Most economists seem to agree that cutting taxes

Accepted Answer

A)  on saving has more impact than cutting taxes to increase investment. 
B)  to stimulate investment is more effective than cutting taxes to stimulate work. 
C)  to increase work is more effective than cutting taxes to stimulate investment. 
D)  to increase work incentives is more effective than cutting taxes on saving. 
A)  on saving has more impact than cutting taxes to increase investment. 
B)  to stimulate investment is more effective than cutting taxes to stimulate work. 
C)  to increase work is more effective than cutting taxes to stimulate investment. 
D)  to increase work incentives is more effective than cutting taxes on saving.

Question 20

A proponent of supply-side economics would advocate

Accepted Answer

A)  increasing income taxes on saving. 
B)  reducing corporate income tax. 
C)  increasing capital gains tax. 
D)  increasing personal income tax. 
A)  increasing income taxes on saving. 
B)  reducing corporate income tax. 
C)  increasing capital gains tax. 
D)  increasing personal income tax.

Do policy makers know the level of unemployment that is associated with "full employment"?

Suppose that the U.S.personal income tax was eliminated and replaced with a fixed tax that raised the exact same amount of revenue.The multiplier would be

The oversimplified formula for the multiplier is misleading because it ignores the effects of

The macroeconomic policy planner's job is made difficult because of

Fiscal policy is the use of taxes and spending by the government to affect aggregate demand.

In 2006 and 2007 the U.S.faced an inflationary gap which would suggest the use of restrictive fiscal policy.

Tax cuts associated with supply-side economics often lead to increased

In order to maintain a balanced budget,Congress has decided to cut taxes and government spending both by $25 billion.What will happen to GDP?

If the economy experiences an unplanned inventory accumulation at the full employment level of GDP,then the economy is in a(n)

Critics of supply-side economics argue that

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

The president wishes to increase spending for education by $4 billion but also maintain a balanced budget.Therefore,taxes will also be increased by $4 billion.What will happen to GDP?

The government's fiscal policy is its plan to influence aggregate demand by changing

"Fiscal Policy" is the federal government's plan for

The Bush tax cuts

Figure 11-3 -Refer to Table 11-1.What is the level of consumption in this model?

A change in a fixed tax will cause the consumption schedule to

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Most economists seem to agree that cutting taxes

A proponent of supply-side economics would advocate

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 11: Managing Aggregate Demand Fiscal Policy

Do policy makers know the level of unemployment that is associated with "full employment"?

Suppose that the U.S.personal income tax was eliminated and replaced with a fixed tax that raised the exact same amount of revenue.The multiplier would be

The oversimplified formula for the multiplier is misleading because it ignores the effects of

The macroeconomic policy planner's job is made difficult because of

Fiscal policy is the use of taxes and spending by the government to affect aggregate demand.

In 2006 and 2007 the U.S.faced an inflationary gap which would suggest the use of restrictive fiscal policy.

Tax cuts associated with supply-side economics often lead to increased

In order to maintain a balanced budget,Congress has decided to cut taxes and government spending both by $25 billion.What will happen to GDP?

If the economy experiences an unplanned inventory accumulation at the full employment level of GDP,then the economy is in a(n)

Critics of supply-side economics argue that

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

The president wishes to increase spending for education by $4 billion but also maintain a balanced budget.Therefore,taxes will also be increased by $4 billion.What will happen to GDP?

The government's fiscal policy is its plan to influence aggregate demand by changing

"Fiscal Policy" is the federal government's plan for

The Bush tax cuts

Figure 11-3 -Refer to Table 11-1.What is the level of consumption in this model?

A change in a fixed tax will cause the consumption schedule to

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Most economists seem to agree that cutting taxes

A proponent of supply-side economics would advocate

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters