Question 1

Exhibit 11-1 Disposable income and consumption data   In Exhibit 11-1, when disposable income is increased from $2,000 to $3,000 to $4,000,

Accepted Answer

A) total consumption increases by $1,000. 
B) the marginal propensity to consume remains constant. 
C) the marginal propensity to consume increases from 0.6 to 0.7. 
D) the marginal propensity to consume decreases from 0.8 to 0.7. 
E) the marginal propensity to consume decreases from 0.7 to 0.6. 
A) total consumption increases by $1,000. 
B) the marginal propensity to consume remains constant. 
C) the marginal propensity to consume increases from 0.6 to 0.7. 
D) the marginal propensity to consume decreases from 0.8 to 0.7. 
E) the marginal propensity to consume decreases from 0.7 to 0.6.

Question 2

When an economy is operating below its potential capacity, Keynesian economists argue that:

Accepted Answer

A) taxes should be raised if the government is currently running a budget deficit. 
B) taxes should be lowered but only if the government is running a budget surplus. 
C) the government should cut taxes and\or increase spending in order to stimulate aggregate demand. 
D) all of these. 
A) taxes should be raised if the government is currently running a budget deficit. 
B) taxes should be lowered but only if the government is running a budget surplus. 
C) the government should cut taxes and\or increase spending in order to stimulate aggregate demand. 
D) all of these.

Question 3

The presence of the automatic stabilizers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Accepted Answer

A) True 
 B)False

Exhibit 11-1 Disposable income and consumption data In Exhibit 11-1, when disposable income is increased from $2,000 to $3,000 to $4,000,

When an economy is operating below its potential capacity, Keynesian economists argue that:

The presence of the automatic stabilizers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Exam 11: Fiscal Policy

Exhibit 11-1 Disposable income and consumption data In Exhibit 11-1, when disposable income is increased from $2,000 to $3,000 to $4,000,

When an economy is operating below its potential capacity, Keynesian economists argue that:

The presence of the automatic stabilizers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters