Exam 11: Fiscal Policy

Suppose the Congress enacts a 5 percent decrease in annual military expenditures. Other things equal, this can be associated with:

Assume that French budget deficits have raised the French prime interest rate relative to the U.S. T-bill rate. As a result, we would expect the U.S. dollar to depreciate and the U.S. net exports to rise.

A higher U.S. federal budget deficit may act to raise future U.S. interest payments to foreigners.

Assume that European interest rates fall as a result of decreased deficit spending by the governments of the European Union. We would expect all of the following, except:

National debt can be defined as:

Government spending equals the sum of _____, _____, and _____.

If the government sells U.S. Treasury bonds to finance its budget deficit, one would expect:

Which of the following will be observed if the U.S. federal government reduces fiscal spending, keeping other things constant?

Other things equal, the steeper the slope of the aggregate supply curve, the more effective will be the expansionary fiscal policy.

Empirical evidence suggests that the United States ran close to a balanced budget during the World War II.

Discretionary fiscal policy is best defined as:

An increase in deficit spending tends to raise interest rates, thereby resulting in a multiplier effect that is higher than what would be associated with an equivalent increase in consumption spending.

For which of the following reasons is VAT considered a very important revenue generator for a government?

Identify the correct statement.

Suppose the marginal tax rate is 37 percent for an income level of $50,000 and 39 percent for an $80,000 income. This implies that the underlying tax structure is _____ in nature.

Assume an economy has automatic stabilizers in place that include a progressive tax structure and a transfer payment system. Then in a period of high economic growth and high inflation, we would expect:

Governments in developing countries typically play a larger role in investment spending in their economies than do the governments of industrial countries.

Suppose an economy is in equilibrium. Also suppose that consumer expectations change as the threat of war increases the likelihood of an increase in taxes. This would result in:

Which of the following statements about taxation is incorrect?

A(n) _____ is an indirect tax imposed on each sale at each stage of production.