Question 1

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following was a successful application of fiscal policy in the United States?

Accepted Answer

A) Roosevelt's strategy in combating the Great Depression 
B) The tax cut of 1964 
C) The temporary tax surcharge of 1968 
D) The battle against stagflation during the 1970s 
E) The large tax cut of 1981 
A) Roosevelt's strategy in combating the Great Depression 
B) The tax cut of 1964 
C) The temporary tax surcharge of 1968 
D) The battle against stagflation during the 1970s 
E) The large tax cut of 1981

Question 3

Classical economists believed that if saving were greater than investment,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 4

Which of the following is a difference between the theories of John Maynard Keynes and the classical economists?

Accepted Answer

A) Unlike Keynesian economists,classical economists believed that unemployment was a serious long-term problem. 
B) Unlike Keynesian economists,classical economists advocated that the economy was always in equilibrium. 
C) Unlike Keynesian economists,classical economists believed that the economy would always settle at full employment. 
D) Unlike Keynesian economists,classical economists did not believe that the economy was always in equilibrium. 
E) Unlike Keynesian economists,classical economists believed a glut created an unemployment problem for the economy. 
A) Unlike Keynesian economists,classical economists believed that unemployment was a serious long-term problem. 
B) Unlike Keynesian economists,classical economists advocated that the economy was always in equilibrium. 
C) Unlike Keynesian economists,classical economists believed that the economy would always settle at full employment. 
D) Unlike Keynesian economists,classical economists did not believe that the economy was always in equilibrium. 
E) Unlike Keynesian economists,classical economists believed a glut created an unemployment problem for the economy.

Question 5

A change in government spending can close an expansionary gap by shifting the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 6

Most government purchases are made at the federal level and not at the state level.

Accepted Answer

A) True 
 B)False

Question 7

The government's $168 billion plan to stimulate the softening economy in 2008 failed partly because the tax cuts were temporary.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following correctly describes the effects of a decrease in net taxes?

Accepted Answer

A) Disposable income increases,consumption decreases,and saving decreases. 
B) Disposable income increases,consumption increases,and saving increases. 
C) Disposable income decreases,consumption increases,and saving increases. 
D) Disposable income decreases,consumption decreases,and saving decreases. 
E) There is no effect on either disposable income,consumption,or saving. 
A) Disposable income increases,consumption decreases,and saving decreases. 
B) Disposable income increases,consumption increases,and saving increases. 
C) Disposable income decreases,consumption increases,and saving increases. 
D) Disposable income decreases,consumption decreases,and saving decreases. 
E) There is no effect on either disposable income,consumption,or saving.

Question 9

The steeper the short-run aggregate supply curve,_____.

Accepted Answer

A) the steeper the aggregate demand curve 
B) the larger the value of the spending multiplier 
C) the larger the budget surplus 
D) the larger the impact of a shift in aggregate demand on the equilibrium price level 
E) the larger the impact of a shift in aggregate demand on the equilibrium output level 
A) the steeper the aggregate demand curve 
B) the larger the value of the spending multiplier 
C) the larger the budget surplus 
D) the larger the impact of a shift in aggregate demand on the equilibrium price level 
E) the larger the impact of a shift in aggregate demand on the equilibrium output level

Question 10

Recent studies on the effectiveness of fiscal policy tend to suggest that the government spending multiplier is less than 1.0.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true of the Golden Age of fiscal policy of the 1960s?

Accepted Answer

A) Fiscal policy was used to prevent output from expanding in 1964. 
B) Lyndon B.Johnson cut income tax rates to reduce inflationary pressures in the economy 
C) A tax cut was introduced to increase savings and unemployment. 
D) A tax cut increased disposable income and consumption. 
E) The unemployment rate rose by 5 percent for the first time in seven years 
A) Fiscal policy was used to prevent output from expanding in 1964. 
B) Lyndon B.Johnson cut income tax rates to reduce inflationary pressures in the economy 
C) A tax cut was introduced to increase savings and unemployment. 
D) A tax cut increased disposable income and consumption. 
E) The unemployment rate rose by 5 percent for the first time in seven years

Question 12

The unemployment problem becomes more severe if prices are sticky downward.

Accepted Answer

A) True 
 B)False

Question 13

An automatic stabilizer:

Accepted Answer

A) increases inflationary pressure during expansions. 
B) Increases the drop in disposable income during recessions and increases the jump in disposable income during expansions. 
C) reduces the drop in disposable income during recessions and reduces the jump in disposable income during expansions. 
D) increases tax revenue relative to government spending throughout the business cycle. 
E) decreases tax revenue relative to government spending throughout the business cycle. 
A) increases inflationary pressure during expansions. 
B) Increases the drop in disposable income during recessions and increases the jump in disposable income during expansions. 
C) reduces the drop in disposable income during recessions and reduces the jump in disposable income during expansions. 
D) increases tax revenue relative to government spending throughout the business cycle. 
E) decreases tax revenue relative to government spending throughout the business cycle.

Question 14

Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is initially at point

Accepted Answer

A) Q1 and Q2. 
B) Q2 and Q3. 
C) Q1 and Q3. 
D) AD and AD*. 
E) AD* and AD'. 
A) Q1 and Q2. 
B) Q2 and Q3. 
C) Q1 and Q3. 
D) AD and AD*. 
E) AD* and AD'.

Question 15

Which of the following best describes stagflation?

Accepted Answer

A) Rising unemployment together with economic growth 
B) Deflation coupled with a decline in money supply 
C) Deficits coupled with rising unemployment 
D) Rising unemployment and high inflation rates 
E) Inflation coupled with balance of trade deficits 
A) Rising unemployment together with economic growth 
B) Deflation coupled with a decline in money supply 
C) Deficits coupled with rising unemployment 
D) Rising unemployment and high inflation rates 
E) Inflation coupled with balance of trade deficits

Question 16

Which of the following is most likely to close a recessionary gap in the economy?

Accepted Answer

A) A decrease in the expenditure on infrastructure 
B) An increase in the income tax rate 
C) An increase in the rate of foreign exchange 
D) A decrease in money supply 
E) An increase in the compensation for government employees 
A) A decrease in the expenditure on infrastructure 
B) An increase in the income tax rate 
C) An increase in the rate of foreign exchange 
D) A decrease in money supply 
E) An increase in the compensation for government employees

Question 17

The passage of the Employment Act of 1946 assigned:

Accepted Answer

A) the federal government the responsibility for promoting full employment and price stability. 
B) the federal government the responsibility for promoting free markets to achieve economic prosperity. 
C) the federal government the responsibility to set a minimum wage for all agricultural workers. 
D) state governments the responsibility to set a minimum wage for all industrial workers. 
E) state governments the responsibility for promoting full employment and price stability. 
A) the federal government the responsibility for promoting full employment and price stability. 
B) the federal government the responsibility for promoting free markets to achieve economic prosperity. 
C) the federal government the responsibility to set a minimum wage for all agricultural workers. 
D) state governments the responsibility to set a minimum wage for all industrial workers. 
E) state governments the responsibility for promoting full employment and price stability.

Question 18

Which of the following factors did not contribute to the federal budget surpluses in the 1990s?

Accepted Answer

A) Higher taxes on the rich 
B) More federal government spending discipline 
C) Market globalization 
D) Slower consumer spending 
E) Rising business optimism based on technological innovation 
A) Higher taxes on the rich 
B) More federal government spending discipline 
C) Market globalization 
D) Slower consumer spending 
E) Rising business optimism based on technological innovation

Question 19

Suppose the government increases unemployment benefits,which are paid for with higher taxes on earnings.If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes,_____.

Accepted Answer

A) GDP will first increase and then fall. 
B) There will be no change in real GDP. 
C) Real GDP will increase substantially. 
D) Real GDP will fall substantially. 
E) GDP will first fall and then increase. 
A) GDP will first increase and then fall. 
B) There will be no change in real GDP. 
C) Real GDP will increase substantially. 
D) Real GDP will fall substantially. 
E) GDP will first fall and then increase.

Question 20

A tax is considered to be independent of:

Accepted Answer

A) investment. 
B) consumption. 
C) government spending. 
D) real GDP. 
E) the price level. 
A) investment. 
B) consumption. 
C) government spending. 
D) real GDP. 
E) the price level.

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.

Which of the following was a successful application of fiscal policy in the United States?

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

Which of the following is a difference between the theories of John Maynard Keynes and the classical economists?

A change in government spending can close an expansionary gap by shifting the short-run aggregate supply curve.

Most government purchases are made at the federal level and not at the state level.

The government's $168 billion plan to stimulate the softening economy in 2008 failed partly because the tax cuts were temporary.

Which of the following correctly describes the effects of a decrease in net taxes?

The steeper the short-run aggregate supply curve,_____.

Recent studies on the effectiveness of fiscal policy tend to suggest that the government spending multiplier is less than 1.0.

Which of the following is true of the Golden Age of fiscal policy of the 1960s?

The unemployment problem becomes more severe if prices are sticky downward.

An automatic stabilizer:

Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is initially at point

Which of the following best describes stagflation?

Which of the following is most likely to close a recessionary gap in the economy?

The passage of the Employment Act of 1946 assigned:

Which of the following factors did not contribute to the federal budget surpluses in the 1990s?

Suppose the government increases unemployment benefits,which are paid for with higher taxes on earnings.If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes,_____.

A tax is considered to be independent of:

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

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.

Which of the following was a successful application of fiscal policy in the United States?

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

Which of the following is a difference between the theories of John Maynard Keynes and the classical economists?

A change in government spending can close an expansionary gap by shifting the short-run aggregate supply curve.

Most government purchases are made at the federal level and not at the state level.

The government's $168 billion plan to stimulate the softening economy in 2008 failed partly because the tax cuts were temporary.

Which of the following correctly describes the effects of a decrease in net taxes?

The steeper the short-run aggregate supply curve,_____.

Recent studies on the effectiveness of fiscal policy tend to suggest that the government spending multiplier is less than 1.0.

Which of the following is true of the Golden Age of fiscal policy of the 1960s?

The unemployment problem becomes more severe if prices are sticky downward.

An automatic stabilizer:

Figure 11.2 shows the relationship between the price level and real GDP.Suppose the economy is initially at point

Which of the following best describes stagflation?

Which of the following is most likely to close a recessionary gap in the economy?

The passage of the Employment Act of 1946 assigned:

Which of the following factors did not contribute to the federal budget surpluses in the 1990s?

Suppose the government increases unemployment benefits,which are paid for with higher taxes on earnings.If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes,_____.

A tax is considered to be independent of:

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 saving were greater than investment,the interest rate would ___,causing saving to _ and investment to ___ until the two were equal.