Question 1

Which of the following policies is a supply-side policy?

Accepted Answer

A)  higher taxes 
B)  increase in regulation 
C)  increase in resource prices 
D)  subsidies to produce technological advances 
A)  higher taxes 
B)  increase in regulation 
C)  increase in resource prices 
D)  subsidies to produce technological advances

Question 2

Which of the following would be an appropriate discretionary fiscal policy to use when the economy is in a recession?

Accepted Answer

A)  increased government spending 
B)  higher taxes 
C)  a balanced-budget reduction in both spending and taxes 
D)  an expansion in the money supply 
A)  increased government spending 
B)  higher taxes 
C)  a balanced-budget reduction in both spending and taxes 
D)  an expansion in the money supply

Question 3

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

Accepted Answer

A)  Classical school 
B)  Keynesian school 
C)  Supply-side school 
D)  Rational expectations school 
A)  Classical school 
B)  Keynesian school 
C)  Supply-side school 
D)  Rational expectations school

Question 4

The Keynesian analysis of fiscal policy argues that:

Accepted Answer

A)  fiscal policy should generally be expansionary except during periods of economic recession. 
B)  fiscal policy should generally be restrictive except during inflationary booms. 
C)  the federal budget should be balanced annually except during war. 
D)  the federal budget should be used to maintain aggregate demand at a level consistent with full employment. 
A)  fiscal policy should generally be expansionary except during periods of economic recession. 
B)  fiscal policy should generally be restrictive except during inflationary booms. 
C)  the federal budget should be balanced annually except during war. 
D)  the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

Question 5

Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?

Accepted Answer

A)  $300 decrease in taxes. 
B)  $75 increase in government spending. 
C)  $75 decrease in taxes. 
D)  $75 decrease in government spending. 
A)  $300 decrease in taxes. 
B)  $75 increase in government spending. 
C)  $75 decrease in taxes. 
D)  $75 decrease in government spending.

Question 6

Assume that an economy's spending multiplier is 4. If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full-employment equilibrium of $1,500 billion?

Accepted Answer

A)  $500 billion spending cut. 
B)  $500 billion spending increase. 
C)  $125 billion spending cut. 
D)  $125 billion spending increase. 
A)  $500 billion spending cut. 
B)  $500 billion spending increase. 
C)  $125 billion spending cut. 
D)  $125 billion spending increase.

Question 7

Suppose the economy is on the classical range of the aggregate supply curve and has a problem with inflation. According to Keynesian theory, which of the following is an appropriate discretionary fiscal policy to use in this situation?

Accepted Answer

A)  a reduction in the money supply 
B)  less government regulation 
C)  increase federal spending 
D)  higher taxes 
A)  a reduction in the money supply 
B)  less government regulation 
C)  increase federal spending 
D)  higher taxes

Question 8

Which of the following would most likely occur if the federal government decreased its spending and reduced the size of the budget deficit during a period of full employment?

Accepted Answer

A)  The rate of inflation would decline. 
B)  The rate of inflation would rise. 
C)  A recession would develop. 
D)  Interest rates would fall. 
A)  The rate of inflation would decline. 
B)  The rate of inflation would rise. 
C)  A recession would develop. 
D)  Interest rates would fall.

Which of the following policies is a supply-side policy?

Which of the following would be an appropriate discretionary fiscal policy to use when the economy is in a recession?

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

The Keynesian analysis of fiscal policy argues that:

Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?

Assume that an economy's spending multiplier is 4. If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full-employment equilibrium of $1,500 billion?

Suppose the economy is on the classical range of the aggregate supply curve and has a problem with inflation. According to Keynesian theory, which of the following is an appropriate discretionary fiscal policy to use in this situation?

Which of the following would most likely occur if the federal government decreased its spending and reduced the size of the budget deficit during a period of full employment?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters

Exam 21: Fiscal Policy

Which of the following policies is a supply-side policy?

Which of the following would be an appropriate discretionary fiscal policy to use when the economy is in a recession?

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

The Keynesian analysis of fiscal policy argues that:

Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?

Assume that an economy's spending multiplier is 4. If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full-employment equilibrium of $1,500 billion?

Suppose the economy is on the classical range of the aggregate supply curve and has a problem with inflation. According to Keynesian theory, which of the following is an appropriate discretionary fiscal policy to use in this situation?

Which of the following would most likely occur if the federal government decreased its spending and reduced the size of the budget deficit during a period of full employment?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters