Question 1

Fiscal policy under the Reagan administration was intended to:

Accepted Answer

A) stimulate the economy by decreasing taxes in order to increase consumption. 
B) increase tax revenues by increasing the tax rate. 
C) balance the budget by increasing defense spending and increasing taxes. 
D) stimulate the economy by decreasing taxes in order to increase aggregate supply. 
E) stimulate the economy by increasing government spending in order to increase aggregate supply. 
A) stimulate the economy by decreasing taxes in order to increase consumption. 
B) increase tax revenues by increasing the tax rate. 
C) balance the budget by increasing defense spending and increasing taxes. 
D) stimulate the economy by decreasing taxes in order to increase aggregate supply. 
E) stimulate the economy by increasing government spending in order to increase aggregate supply.

Question 2

In which of the following ways does government affect the consumption component of planned aggregate expenditures?

Accepted Answer

A) Through net taxes,which change disposable income 
B) By purchasing goods and services,which increase consumption 
C) By using subsidies to encourage firms to invest 
D) By reducing the interest rate to encourage firms to invest 
E) By producing public goods 
A) Through net taxes,which change disposable income 
B) By purchasing goods and services,which increase consumption 
C) By using subsidies to encourage firms to invest 
D) By reducing the interest rate to encourage firms to invest 
E) By producing public goods

Question 3

Given the desire of politicians to get reelected,they might try in the short run to use _____.

Accepted Answer

A) a contractionary monetary policy 
B) an expansionary fiscal policy 
C) an expansionary monetary policy 
D) tax increases 
E) automatic stabilizers to control demand 
A) a contractionary monetary policy 
B) an expansionary fiscal policy 
C) an expansionary monetary policy 
D) tax increases 
E) automatic stabilizers to control demand

Question 4

A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are tools of fiscal policy except one.Which is the exception?

Accepted Answer

A) Taxes 
B) Transfer payments 
C) Interest rates 
D) Government purchases of goods 
E) Government purchases of services 
A) Taxes 
B) Transfer payments 
C) Interest rates 
D) Government purchases of goods 
E) Government purchases of services

Question 6

Fiscal policy is likely to fail to correct stagflation in an economy because:

Accepted Answer

A) it affects both aggregate demand and supply,although only aggregate supply needs to be changed. 
B) it affects both the aggregate demand and supply,although only aggregate demand needs to be changed. 
C) it affects aggregate demand only,although aggregate supply needs to changed. 
D) it affects aggregate supply only,although only aggregate demand needs to be changed. 
E) it affects either aggregate demand or aggregate supply,although both need to be changed simultaneously. 
A) it affects both aggregate demand and supply,although only aggregate supply needs to be changed. 
B) it affects both the aggregate demand and supply,although only aggregate demand needs to be changed. 
C) it affects aggregate demand only,although aggregate supply needs to changed. 
D) it affects aggregate supply only,although only aggregate demand needs to be changed. 
E) it affects either aggregate demand or aggregate supply,although both need to be changed simultaneously.

Question 7

One lesson of the Great Depression was that potential GDP could _____.

Accepted Answer

A) be too low to ensure full employment if the population was growing 
B) be too low to ensure full employment in a capitalist economy 
C) be too low to ensure full employment in a market economy 
D) fall short of full-employment GDP 
E) exceed equilibrium GDP 
A) be too low to ensure full employment if the population was growing 
B) be too low to ensure full employment in a capitalist economy 
C) be too low to ensure full employment in a market economy 
D) fall short of full-employment GDP 
E) exceed equilibrium GDP

Question 8

The American Recovery and Reinvestment Act,signed by President Barack Obama in 2009,aimed at:

Accepted Answer

A) stimulating the aggregate demand in the economy. 
B) removing the supply bottlenecks in the economy. 
C) closing an expansionary gap through a contractionary fiscal policy. 
D) ensuring free trade flows across the world. 
E) providing higher unemployment benefits to the residents of the economy. 
A) stimulating the aggregate demand in the economy. 
B) removing the supply bottlenecks in the economy. 
C) closing an expansionary gap through a contractionary fiscal policy. 
D) ensuring free trade flows across the world. 
E) providing higher unemployment benefits to the residents of the economy.

Question 9

Which of the following is a component of aggregate demand?

Accepted Answer

A) Transfer payments from government 
B) Taxation by government 
C) Purchases by government 
D) Borrowing by government 
E) Saving by consumers 
A) Transfer payments from government 
B) Taxation by government 
C) Purchases by government 
D) Borrowing by government 
E) Saving by consumers

Question 10

If people base their spending decisions more on permanent income than current income,then:

Accepted Answer

A) consumption spending will be more responsive to a temporary change in income than a change in permanent income. 
B) shifts in aggregate supply will be less predictable than if spending was based on current income. 
C) consumption spending will fluctuate more widely than if such spending was determined by current income. 
D) shifts in short-run aggregate supply will be more predictable than if spending was based on current income. 
E) attempts to fine-tune the economy with temporary tax rate adjustments will be less effective. 
A) consumption spending will be more responsive to a temporary change in income than a change in permanent income. 
B) shifts in aggregate supply will be less predictable than if spending was based on current income. 
C) consumption spending will fluctuate more widely than if such spending was determined by current income. 
D) shifts in short-run aggregate supply will be more predictable than if spending was based on current income. 
E) attempts to fine-tune the economy with temporary tax rate adjustments will be less effective.

Question 11

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.

Accepted Answer

A) True 
 B)False

Question 12

The introduction of a tax by the government will:

Accepted Answer

A) have no effect on real GDP since real GDP comprises consumption expenditure,investment expenditure,and government expenditure. 
B) affect consumption through a change in disposable income. 
C) affect consumption through its effect on investment. 
D) affect government spending since the government levies the tax. 
E) increase real GDP since it enables the government to increase spending. 
A) have no effect on real GDP since real GDP comprises consumption expenditure,investment expenditure,and government expenditure. 
B) affect consumption through a change in disposable income. 
C) affect consumption through its effect on investment. 
D) affect government spending since the government levies the tax. 
E) increase real GDP since it enables the government to increase spending.

Question 13

If fiscal policy is used to close an expansionary gap,the _____.

Accepted Answer

A) short-run aggregate supply curve shifts leftward and the price level falls 
B) short-run aggregate supply curve shifts rightward and the price level increases 
C) short-run aggregate supply curve shifts rightward and the price level falls 
D) aggregate demand curve shifts leftward and the price level falls 
E) aggregate demand curve shifts rightward and the price level falls 
A) short-run aggregate supply curve shifts leftward and the price level falls 
B) short-run aggregate supply curve shifts rightward and the price level increases 
C) short-run aggregate supply curve shifts rightward and the price level falls 
D) aggregate demand curve shifts leftward and the price level falls 
E) aggregate demand curve shifts rightward and the price level falls

Question 14

Which of the following macroeconomic variables would likely be affected by a fiscal policy?

Accepted Answer

A) The nominal interest rate 
B) The exchange rate 
C) The discount rate 
D) Employment 
E) Money supply 
A) The nominal interest rate 
B) The exchange rate 
C) The discount rate 
D) Employment 
E) Money supply

Question 15

According to classical economists,government intervention is:

Accepted Answer

A) necessary to maintain a stable price level in the long run. 
B) necessary to maintain a stable price level in the short run. 
C) necessary to maintain full employment in the long run. 
D) necessary to maintain full employment in the short run. 
E) not necessary to maintain full employment. 
A) necessary to maintain a stable price level in the long run. 
B) necessary to maintain a stable price level in the short run. 
C) necessary to maintain full employment in the long run. 
D) necessary to maintain full employment in the short run. 
E) not necessary to maintain full employment.

Question 16

Higher unemployment benefits funded by higher taxes on earnings would:

Accepted Answer

A) decrease aggregate supply in an economy. 
B) increase the supply of labor in an economy. 
C) increase the price level in an economy. 
D) decrease aggregate demand in an economy. 
E) increase the opportunity cost of leisure. 
A) decrease aggregate supply in an economy. 
B) increase the supply of labor in an economy. 
C) increase the price level in an economy. 
D) decrease aggregate demand in an economy. 
E) increase the opportunity cost of leisure.

Question 17

Which of the following did classical economists believe caused depressions and high unemployment?

Accepted Answer

A) Sticky product prices 
B) Tax increases 
C) Business expectations 
D) Sticky wages 
E) Sticky interest rates 
A) Sticky product prices 
B) Tax increases 
C) Business expectations 
D) Sticky wages 
E) Sticky interest rates

Question 18

The goal of fiscal policy after the Great Depression was to:

Accepted Answer

A) balance federal budget. 
B) manipulate aggregate demand and supply to fight unemployment. 
C) influence aggregate demand. 
D) influence aggregate supply. 
E) push the aggregate demand and supply curves to the right. 
A) balance federal budget. 
B) manipulate aggregate demand and supply to fight unemployment. 
C) influence aggregate demand. 
D) influence aggregate supply. 
E) push the aggregate demand and supply curves to the right.

Question 19

When net taxes increase and government purchases decrease,_____.

Accepted Answer

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

Question 20

Either an increase in autonomous net taxes or a decrease in government purchases can close an expansionary gap.

Accepted Answer

A) True 
 B)False

Fiscal policy under the Reagan administration was intended to:

In which of the following ways does government affect the consumption component of planned aggregate expenditures?

Given the desire of politicians to get reelected,they might try in the short run to use _____.

A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.

All of the following are tools of fiscal policy except one.Which is the exception?

Fiscal policy is likely to fail to correct stagflation in an economy because:

One lesson of the Great Depression was that potential GDP could _____.

The American Recovery and Reinvestment Act,signed by President Barack Obama in 2009,aimed at:

Which of the following is a component of aggregate demand?

If people base their spending decisions more on permanent income than current income,then:

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.

The introduction of a tax by the government will:

If fiscal policy is used to close an expansionary gap,the _____.

Which of the following macroeconomic variables would likely be affected by a fiscal policy?

According to classical economists,government intervention is:

Higher unemployment benefits funded by higher taxes on earnings would:

Which of the following did classical economists believe caused depressions and high unemployment?

The goal of fiscal policy after the Great Depression was to:

When net taxes increase and government purchases decrease,_____.

Either an increase in autonomous net taxes or a decrease in government purchases can close an expansionary gap.

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

Fiscal policy under the Reagan administration was intended to:

In which of the following ways does government affect the consumption component of planned aggregate expenditures?

Given the desire of politicians to get reelected,they might try in the short run to use _____.

A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.

All of the following are tools of fiscal policy except one.Which is the exception?

Fiscal policy is likely to fail to correct stagflation in an economy because:

One lesson of the Great Depression was that potential GDP could _____.

The American Recovery and Reinvestment Act,signed by President Barack Obama in 2009,aimed at:

Which of the following is a component of aggregate demand?

If people base their spending decisions more on permanent income than current income,then:

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.

The introduction of a tax by the government will:

If fiscal policy is used to close an expansionary gap,the _____.

Which of the following macroeconomic variables would likely be affected by a fiscal policy?

According to classical economists,government intervention is:

Higher unemployment benefits funded by higher taxes on earnings would:

Which of the following did classical economists believe caused depressions and high unemployment?

The goal of fiscal policy after the Great Depression was to:

When net taxes increase and government purchases decrease,_____.

Either an increase in autonomous net taxes or a decrease in government purchases can close an expansionary gap.

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