Question 1

Unemployment insurance is an example of a discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 2

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following would be the result of an increase in government purchases?

Accepted Answer

A) A movement from Q3 to Q2 
B) A movement from e' to e* 
C) A movement from e" to e* 
D) A movement from Q2 to Q3 
E) A movement from Q1 to Q3 
A) A movement from Q3 to Q2 
B) A movement from e' to e* 
C) A movement from e" to e* 
D) A movement from Q2 to Q3 
E) A movement from Q1 to Q3

Question 3

Which of the following would increase aggregate demand?

Accepted Answer

A) A deficit in the government budget 
B) An increase in taxes 
C) An increase in government borrowing 
D) A surplus in the government budget 
E) A decrease in government spending 
A) A deficit in the government budget 
B) An increase in taxes 
C) An increase in government borrowing 
D) A surplus in the government budget 
E) A decrease in government spending

Question 4

When spending by the federal government exceeds net taxes,_____.

Accepted Answer

A) the price level tends to fall 
B) the money supply must fall 
C) the aggregate demand curve shifts rightward 
D) aggregate supply moves rightward 
E) there is a federal budget surplus 
A) the price level tends to fall 
B) the money supply must fall 
C) the aggregate demand curve shifts rightward 
D) aggregate supply moves rightward 
E) there is a federal budget surplus

Question 5

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that:

Accepted Answer

A) only discretionary fiscal policy can stimulate the economy. 
B) only automatic stabilizers can stimulate the economy. 
C) discretionary fiscal policy,once adopted,is built into the structure of the economy. 
D) automatic stabilizers,once adopted,are built into the structure of the economy. 
E) only discretionary fiscal policy can be used by the federal government. 
A) only discretionary fiscal policy can stimulate the economy. 
B) only automatic stabilizers can stimulate the economy. 
C) discretionary fiscal policy,once adopted,is built into the structure of the economy. 
D) automatic stabilizers,once adopted,are built into the structure of the economy. 
E) only discretionary fiscal policy can be used by the federal government.

Question 6

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

Accepted Answer

A) Decreasing taxes to protect consumers from the effects of inflation 
B) Increasing taxes to reduce aggregate demand 
C) Increasing government spending to provide some of the goods that consumers can no longer afford at the higher prices 
D) Decreasing government spending to cause a decrease in the demand for money 
E) Increasing transfer payments to poor people,who are hurt the most by the inflation 
A) Decreasing taxes to protect consumers from the effects of inflation 
B) Increasing taxes to reduce aggregate demand 
C) Increasing government spending to provide some of the goods that consumers can no longer afford at the higher prices 
D) Decreasing government spending to cause a decrease in the demand for money 
E) Increasing transfer payments to poor people,who are hurt the most by the inflation

Question 7

Which of the following is true about classical economists?

Accepted Answer

A) They argued that the sources of depressions and high unemployment lay within the market system. 
B) They advocated laissez-faire policies to promote economic growth. 
C) They believed the economy would naturally tend toward unemployment. 
D) They believed prices and wages were rigid. 
E) They encouraged government intervention in markets. 
A) They argued that the sources of depressions and high unemployment lay within the market system. 
B) They advocated laissez-faire policies to promote economic growth. 
C) They believed the economy would naturally tend toward unemployment. 
D) They believed prices and wages were rigid. 
E) They encouraged government intervention in markets.

Question 8

When the government closes an expansionary gap with a change in government spending,the _____ in government spending leads to _____.

Accepted Answer

A) decrease;a decrease in both real GDP and the price level 
B) decrease;a decrease in real GDP and an increase in the price level 
C) decrease;an increase in both real GDP and the price level 
D) decrease;an increase in real GDP and a decrease in the price level 
E) increase;a decrease in both real GDP and the price level 
A) decrease;a decrease in both real GDP and the price level 
B) decrease;a decrease in real GDP and an increase in the price level 
C) decrease;an increase in both real GDP and the price level 
D) decrease;an increase in real GDP and a decrease in the price level 
E) increase;a decrease in both real GDP and the price level

Question 9

When government purchases increase,the spending multiplier indicates the _____.

Accepted Answer

A) amount of movement along the aggregate demand curve 
B) amount of movement along the aggregate supply curve 
C) size of the rightward shift of the aggregate demand curve at a given price level 
D) size of the rightward shift of the aggregate supply curve at a given price level 
E) size of the expansionary gap 
A) amount of movement along the aggregate demand curve 
B) amount of movement along the aggregate supply curve 
C) size of the rightward shift of the aggregate demand curve at a given price level 
D) size of the rightward shift of the aggregate supply curve at a given price level 
E) size of the expansionary gap

Question 10

A new tax introduced by the government will:

Accepted Answer

A) decrease disposable income. 
B) increase disposable income. 
C) lead to a reduction in government spending. 
D) lead to an increase in government spending. 
E) have no effect on disposable income. 
A) decrease disposable income. 
B) increase disposable income. 
C) lead to a reduction in government spending. 
D) lead to an increase in government spending. 
E) have no effect on disposable income.

Question 11

Who argued that the economy should be left to itself to close a recessionary gap?

Accepted Answer

A) John F.Kennedy 
B) John Maynard Keynes 
C) Mercantilists 
D) Classical economists 
E) Socialists 
A) John F.Kennedy 
B) John Maynard Keynes 
C) Mercantilists 
D) Classical economists 
E) Socialists

Unemployment insurance is an example of a discretionary fiscal policy.

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following would be the result of an increase in government purchases?

Which of the following would increase aggregate demand?

When spending by the federal government exceeds net taxes,_____.

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that:

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

Which of the following is true about classical economists?

When the government closes an expansionary gap with a change in government spending,the _ in government spending leads to _.

When government purchases increase,the spending multiplier indicates the _____.

A new tax introduced by the government will:

Who argued that the economy should be left to itself to close a recessionary 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

Unemployment insurance is an example of a discretionary fiscal policy.

Figure 11.2 shows the relationship between the price level and real GDP.Which of the following would be the result of an increase in government purchases?

Which of the following would increase aggregate demand?

When spending by the federal government exceeds net taxes,_____.

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that:

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

Which of the following is true about classical economists?

When the government closes an expansionary gap with a change in government spending,the _____ in government spending leads to _____.

When government purchases increase,the spending multiplier indicates the _____.

A new tax introduced by the government will:

Who argued that the economy should be left to itself to close a recessionary 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

When the government closes an expansionary gap with a change in government spending,the _ in government spending leads to _.