Question 1

A change in net taxes affects the equilibrium quantity of GDP demanded_____.

Accepted Answer

A) in the same way as a change in government purchases does 
B) in the same way as a change in planned investment does 
C) in the same way as a change in net exports does 
D) only indirectly,changing the level of disposable income 
E) in an unpredictable manner 
A) in the same way as a change in government purchases does 
B) in the same way as a change in planned investment does 
C) in the same way as a change in net exports does 
D) only indirectly,changing the level of disposable income 
E) in an unpredictable manner

Question 2

All of the following are variables that can be manipulated to affect fiscal policy except one.Which is the exception?

Accepted Answer

A) Personal income taxes 
B) Government expenditures on goods and services 
C) Government expenditures on unemployment benefits 
D) The federal funds rate 
E) Corporate income taxes 
A) Personal income taxes 
B) Government expenditures on goods and services 
C) Government expenditures on unemployment benefits 
D) The federal funds rate 
E) Corporate income taxes

Question 3

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____.

Accepted Answer

A) increase taxes 
B) decrease transfer payments 
C) decrease government purchases 
D) wait for the SRAS curve to shift to the left 
E) increase its purchases 
A) increase taxes 
B) decrease transfer payments 
C) decrease government purchases 
D) wait for the SRAS curve to shift to the left 
E) increase its purchases

Question 4

Fiscal policy is concerned with _____.

Accepted Answer

A) government spending and taxation 
B) government spending and changes in money supply 
C) money supply and taxation 
D) government spending,taxation,and money supply 
E) only money supply 
A) government spending and taxation 
B) government spending and changes in money supply 
C) money supply and taxation 
D) government spending,taxation,and money supply 
E) only money supply

Question 5

The Golden Age of fiscal policy was during _____.

Accepted Answer

A) the 1920s 
B) World War II 
C) the Eisenhower years 
D) the 1960s 
E) the Reagan administration years 
A) the 1920s 
B) World War II 
C) the Eisenhower years 
D) the 1960s 
E) the Reagan administration years

Question 6

If government purchases increase and net taxes decrease,_____.

Accepted Answer

A) the price level will fall 
B) money supply must rise 
C) the aggregate demand curve shifts leftward 
D) aggregate supply shifts rightward 
E) output and employment will increase 
A) the price level will fall 
B) money supply must rise 
C) the aggregate demand curve shifts leftward 
D) aggregate supply shifts rightward 
E) output and employment will increase

Question 7

If policy makers think the natural rate of unemployment is lower than it really is,then their policies designed to move the economy to the estimated natural rate,if continued over the long run,will:

Accepted Answer

A) cause continuing inflation. 
B) shift the long-run aggregate supply curve to the right. 
C) shift the supply curve of labor to the right. 
D) lead to a lower price level. 
E) keep the economy below its potential GDP level. 
A) cause continuing inflation. 
B) shift the long-run aggregate supply curve to the right. 
C) shift the supply curve of labor to the right. 
D) lead to a lower price level. 
E) keep the economy below its potential GDP level.

Question 8

Supply-side economics emphasized government policies to:

Accepted Answer

A) restrict aggregate spending and boost aggregate supply. 
B) increase minimum wage to improve labor productivity. 
C) stimulate real GDP by improving incentives to work. 
D) lower interest rates to boost saving. 
E) increase government tax revenues in order to increase government purchases. 
A) restrict aggregate spending and boost aggregate supply. 
B) increase minimum wage to improve labor productivity. 
C) stimulate real GDP by improving incentives to work. 
D) lower interest rates to boost saving. 
E) increase government tax revenues in order to increase government purchases.

Question 9

Which of the following statements best explains the effects of transfer payments and taxes on aggregate spending?

Accepted Answer

A) Transfer payments and taxes affect aggregate spending directly,just as consumption does. 
B) Transfer payments and taxes affect aggregate spending indirectly by first changing disposable income and thereby changing consumption. 
C) Changes in the amount of transfer payments and taxes cancel each other and therefore have no influence on any economic variable. 
D) Transfer payments and taxes affect disposable income but have no effect on consumption. 
E) Transfer payments affect disposable income,but taxes do not. 
A) Transfer payments and taxes affect aggregate spending directly,just as consumption does. 
B) Transfer payments and taxes affect aggregate spending indirectly by first changing disposable income and thereby changing consumption. 
C) Changes in the amount of transfer payments and taxes cancel each other and therefore have no influence on any economic variable. 
D) Transfer payments and taxes affect disposable income but have no effect on consumption. 
E) Transfer payments affect disposable income,but taxes do not.

Question 10

During a recession,unemployment insurance ensures that:

Accepted Answer

A) the disposable income of those who are unemployed will increase above the usual level. 
B) disposable income does not fall by as much as GDP decreases. 
C) disposable income increases as GDP falls. 
D) the marginal propensity to consume increases. 
E) the marginal propensity to consume decreases. 
A) the disposable income of those who are unemployed will increase above the usual level. 
B) disposable income does not fall by as much as GDP decreases. 
C) disposable income increases as GDP falls. 
D) the marginal propensity to consume increases. 
E) the marginal propensity to consume decreases.

Question 11

An increase in the federal budget deficit:

Accepted Answer

A) only occurs when there is a deficit in the balance of trade. 
B) creates deflation. 
C) decreases aggregate demand. 
D) decreases the aggregate quantity demanded along a stationary aggregate demand curve. 
E) raises the equilibrium level of output and employment. 
A) only occurs when there is a deficit in the balance of trade. 
B) creates deflation. 
C) decreases aggregate demand. 
D) decreases the aggregate quantity demanded along a stationary aggregate demand curve. 
E) raises the equilibrium level of output and employment.

Question 12

Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded.

Accepted Answer

A) True 
 B)False

Question 13

Classical economists believed that if investment were greater than saving,the interest rate would _____,causing saving to _____ and investment to _____ until the two were equal.

Accepted Answer

A) rise;decrease;increase 
B) fall;decrease;increase 
C) fall;increase;decrease 
D) rise;increase;decrease 
E) fall;increase;increase 
A) rise;decrease;increase 
B) fall;decrease;increase 
C) fall;increase;decrease 
D) rise;increase;decrease 
E) fall;increase;increase

Question 14

The rate of unemployment that occurs when the economy is producing its potential GDP _____.

Accepted Answer

A) is called the natural rate of unemployment 
B) is zero 
C) is thought to be approximately 10% 
D) can be kept at zero through fiscal policy 
E) is equal to the rate of stagflation in most years 
A) is called the natural rate of unemployment 
B) is zero 
C) is thought to be approximately 10% 
D) can be kept at zero through fiscal policy 
E) is equal to the rate of stagflation in most years

Question 15

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.

Accepted Answer

A) True 
 B)False

Question 16

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following is the long-run equilibrium point?

Accepted Answer

A) A point between e* and e'' 
B) e'' 
C) e* 
D) e' 
E) e 
A) A point between e* and e'' 
B) e'' 
C) e* 
D) e' 
E) e

Question 17

During economic contractions,transfer payments such as welfare benefits _____.

Accepted Answer

A) automatically increase,reducing income further. 
B) automatically increase,reducing the impact of the contraction on disposable income. 
C) automatically decrease because tax revenues fall and welfare benefits are no longer affordable. 
D) are decreased as a discretionary move on the part of Congress to stimulate expansion. 
E) are increased as a discretionary move on the part of Congress to cushion recipients against the negative effects of economic contraction. 
A) automatically increase,reducing income further. 
B) automatically increase,reducing the impact of the contraction on disposable income. 
C) automatically decrease because tax revenues fall and welfare benefits are no longer affordable. 
D) are decreased as a discretionary move on the part of Congress to stimulate expansion. 
E) are increased as a discretionary move on the part of Congress to cushion recipients against the negative effects of economic contraction.

Question 18

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.

Accepted Answer

A) True 
 B)False

Question 19

A change in government purchases has the greatest effect on the economy in the short run when _____.

Accepted Answer

A) the aggregate demand curve is relatively flat. 
B) the aggregate demand curve is relatively steep. 
C) the short-run aggregate supply curve is relatively flat. 
D) the aggregate demand curve is vertical. 
E) the short-run aggregate supply curve is vertical. 
A) the aggregate demand curve is relatively flat. 
B) the aggregate demand curve is relatively steep. 
C) the short-run aggregate supply curve is relatively flat. 
D) the aggregate demand curve is vertical. 
E) the short-run aggregate supply curve is vertical.

Question 20

Which of the following had the greatest impact in pulling the U.S.economy out of the Great Depression?

Accepted Answer

A) The economy's natural tendency to contract toward potential output 
B) The federal government's aggressive policy of tax cuts 
C) The federal government's aggressive policy of monetary stimuli 
D) A precipitous drop in aggregate demand 
E) Increased spending during World War II 
A) The economy's natural tendency to contract toward potential output 
B) The federal government's aggressive policy of tax cuts 
C) The federal government's aggressive policy of monetary stimuli 
D) A precipitous drop in aggregate demand 
E) Increased spending during World War II

A change in net taxes affects the equilibrium quantity of GDP demanded_____.

All of the following are variables that can be manipulated to affect fiscal policy except one.Which is the exception?

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____.

Fiscal policy is concerned with _____.

The Golden Age of fiscal policy was during _____.

If government purchases increase and net taxes decrease,_____.

If policy makers think the natural rate of unemployment is lower than it really is,then their policies designed to move the economy to the estimated natural rate,if continued over the long run,will:

Supply-side economics emphasized government policies to:

Which of the following statements best explains the effects of transfer payments and taxes on aggregate spending?

During a recession,unemployment insurance ensures that:

An increase in the federal budget deficit:

Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded.

Classical economists believed that if investment were greater than saving,the interest rate would ___,causing saving to _ and investment to ___ until the two were equal.

The rate of unemployment that occurs when the economy is producing its potential GDP _____.

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following is the long-run equilibrium point?

During economic contractions,transfer payments such as welfare benefits _____.

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.

A change in government purchases has the greatest effect on the economy in the short run when _____.

Which of the following had the greatest impact in pulling the U.S.economy out of the Great Depression?

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 11: Fiscal Policy

A change in net taxes affects the equilibrium quantity of GDP demanded_____.

All of the following are variables that can be manipulated to affect fiscal policy except one.Which is the exception?

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____.

Fiscal policy is concerned with _____.

The Golden Age of fiscal policy was during _____.

If government purchases increase and net taxes decrease,_____.

If policy makers think the natural rate of unemployment is lower than it really is,then their policies designed to move the economy to the estimated natural rate,if continued over the long run,will:

Supply-side economics emphasized government policies to:

Which of the following statements best explains the effects of transfer payments and taxes on aggregate spending?

During a recession,unemployment insurance ensures that:

An increase in the federal budget deficit:

Equal increases in government purchases and in net taxes have equal but opposite effects on the level of real GDP demanded.

Classical economists believed that if investment were greater than saving,the interest rate would _____,causing saving to _____ and investment to _____ until the two were equal.

The rate of unemployment that occurs when the economy is producing its potential GDP _____.

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following is the long-run equilibrium point?

During economic contractions,transfer payments such as welfare benefits _____.

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.

A change in government purchases has the greatest effect on the economy in the short run when _____.

Which of the following had the greatest impact in pulling the U.S.economy out of the Great Depression?

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Classical economists believed that if investment were greater than saving,the interest rate would ___,causing saving to _ and investment to ___ until the two were equal.