Question 1

The Keynesian approach to fiscal policy advocates:

Accepted Answer

A) continual budget deficits. 
B) manipulation of aggregate demand. 
C) budget deficits when economic growth is high. 
D) budget surpluses when economic growth is low or negative. 
A) continual budget deficits. 
B) manipulation of aggregate demand. 
C) budget deficits when economic growth is high. 
D) budget surpluses when economic growth is low or negative. B

Question 2

A Keynesian approach to fiscal policy would be for government budgets to consistently have a _____ role in the economy.

Accepted Answer

A) neutral 
B) cyclical 
C) countercyclical 
D) contractionary 
E) active 
A) neutral 
B) cyclical 
C) countercyclical 
D) contractionary 
E) active C

Question 3

'Tax cuts - by providing incentives to work,save and invest - will raise employment and lower the price level.' This argument is made by the:

Accepted Answer

A) Keynesian economists. 
B) supply-side economists. 
C) classical economists. 
D) monetarists. 
A) Keynesian economists. 
B) supply-side economists. 
C) classical economists. 
D) monetarists. B

Question 4

The difference between the domestic deficit and the overall deficit is:

Accepted Answer

A) revenue collected from overseas. 
B) government spending on imports. 
C) tax revenue minus government spending. 
D) inflation. 
E) automatic stabilisers. 
A) revenue collected from overseas. 
B) government spending on imports. 
C) tax revenue minus government spending. 
D) inflation. 
E) automatic stabilisers.

Question 5

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Accepted Answer

A) demand-side fiscal policy. 
B) demand-side monetary policy. 
C) supply-side fiscal policy. 
D) supply-side monetary policy. 
E) labour market reform. 
A) demand-side fiscal policy. 
B) demand-side monetary policy. 
C) supply-side fiscal policy. 
D) supply-side monetary policy. 
E) labour market reform.

Question 6

Many economists would argue that,if the government is to run an expansionary fiscal policy,spending should focus on:

Accepted Answer

A) consumption goods. 
B) imports. 
C) infrastructure. 
D) competition. 
A) consumption goods. 
B) imports. 
C) infrastructure. 
D) competition.

Question 7

If the economy is experiencing unemployment,then the most appropriate government policy would be to shift the aggregate:

Accepted Answer

A) demand curve by using a tax increase coupled with spending cuts. 
B) demand curve by using a tax increase coupled with more spending. 
C) demand curve by using a tax cut coupled with spending cuts. 
D) demand curve by using a tax cut coupled with more spending. 
E) supply curve by using a tax cut coupled with spending cuts. 
A) demand curve by using a tax increase coupled with spending cuts. 
B) demand curve by using a tax increase coupled with more spending. 
C) demand curve by using a tax cut coupled with spending cuts. 
D) demand curve by using a tax cut coupled with more spending. 
E) supply curve by using a tax cut coupled with spending cuts.

Question 8

To combat a recession,Keynesian fiscal policy recommends:

Accepted Answer

A) an increase in taxes. 
B) an increase in government spending. 
C) an increase in taxes and a decrease in government purchases to balance the budget. 
D) a reduction in both taxes and government spending. 
A) an increase in taxes. 
B) an increase in government spending. 
C) an increase in taxes and a decrease in government purchases to balance the budget. 
D) a reduction in both taxes and government spending.

Question 9

Countercyclical fiscal policy advocates running a balanced budget over the course of the business cycle.

Accepted Answer

A) True 
 B)False

Question 10

If the government wants to run an expansionary fiscal policy by increasing consumption,the best alternative is likely to be:

Accepted Answer

A) an income tax cut. 
B) a company tax cut. 
C) an income tax rise. 
D) a company tax rise. 
E) a payroll tax cut. 
A) an income tax cut. 
B) a company tax cut. 
C) an income tax rise. 
D) a company tax rise. 
E) a payroll tax cut.

Question 11

An example of a long-term fiscal policy in Australia is:

Accepted Answer

A) the GST. 
B) an encouragement of competition in the markets. 
C) employment of high-ranking academics. 
D) introduction of new markets. 
A) the GST. 
B) an encouragement of competition in the markets. 
C) employment of high-ranking academics. 
D) introduction of new markets.

Question 12

The presence of automatic stabilisers 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

Question 13

Between 1975-6 and 1986-7,the federal budget was consistently:

Accepted Answer

A) balanced. 
B) in surplus. 
C) in deficit. 
D) contractionary. 
E) neutral. 
A) balanced. 
B) in surplus. 
C) in deficit. 
D) contractionary. 
E) neutral.

Question 14

Which of the following is not an example of a supply-side fiscal policy used in Australia?

Accepted Answer

A) Tariff reform. 
B) Financial market deregulation. 
C) Taxation reform. 
D) Reform in education. 
A) Tariff reform. 
B) Financial market deregulation. 
C) Taxation reform. 
D) Reform in education.

Question 15

Equal increases in government expenditures and taxes will:

Accepted Answer

A) cancel each other out so that the equilibrium level of output will remain unchanged. 
B) lead to an equal decrease in the equilibrium level of output. 
C) lead to an equal increase in the equilibrium level of output. 
D) lead to an increase in the equilibrium level of real GDP output that is larger than the initial change in government expenditures and taxes. 
E) lead to an increase in the equilibrium level of output that is smaller than the initial change in government expenditures and taxes. 
A) cancel each other out so that the equilibrium level of output will remain unchanged. 
B) lead to an equal decrease in the equilibrium level of output. 
C) lead to an equal increase in the equilibrium level of output. 
D) lead to an increase in the equilibrium level of real GDP output that is larger than the initial change in government expenditures and taxes. 
E) lead to an increase in the equilibrium level of output that is smaller than the initial change in government expenditures and taxes.

Question 16

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level.If the marginal propensity to consume is 0.75,federal policymakers can follow Keynesian economics and restrain inflation by:

Accepted Answer

A) decreasing tax revenues by $600 billion. 
B) decreasing transfer payments by $200 billion. 
C) increasing tax revenues by $200 billion. 
D) increasing government purchases by $150 billion. 
A) decreasing tax revenues by $600 billion. 
B) decreasing transfer payments by $200 billion. 
C) increasing tax revenues by $200 billion. 
D) increasing government purchases by $150 billion.

Question 17

The introduction of the GST in Australia is an example of:

Accepted Answer

A) a restructuring. 
B) a microeconomic reform. 
C) a monetary policy. 
D) a fiscal policy. 
A) a restructuring. 
B) a microeconomic reform. 
C) a monetary policy. 
D) a fiscal policy.

Question 18

Exhibit 17-1 Aggregate demand and supply model
  
-Beginning at equilibrium E₁ in Exhibit 17-1,when the government increases spending or cuts taxes the economy will experience:

Accepted Answer

A) an inflationary recession. 
B) stagflation. 
C) cost-push inflation. 
D) demand-pull inflation. 
E) steady state. 
A) an inflationary recession. 
B) stagflation. 
C) cost-push inflation. 
D) demand-pull inflation. 
E) steady state.

Question 19

Australia's current national debt is:

Accepted Answer

A) a burden because each person owes on average $1500-2000. 
B) a burden because most of it is held by overseas interests. 
C) a burden in comparison to Japan's current national debt. 
D) not a burden because it is mostly internal and not owed to foreigners. 
A) a burden because each person owes on average $1500-2000. 
B) a burden because most of it is held by overseas interests. 
C) a burden in comparison to Japan's current national debt. 
D) not a burden because it is mostly internal and not owed to foreigners.

Question 20

Exhibit 17-2 Aggregate demand and supply model
  
-Suppose the economy in Exhibit 17-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.75.Following Keynesian economics,the federal government can move the economy to point E₂ and reduce inflation by:

Accepted Answer

A) increasing government spending by $50 billion. 
B) decreasing government spending by $6 billion. 
C) decreasing government spending by $50 billion. 
D) decreasing government spending by $100 billion. 
A) increasing government spending by $50 billion. 
B) decreasing government spending by $6 billion. 
C) decreasing government spending by $50 billion. 
D) decreasing government spending by $100 billion.

The Keynesian approach to fiscal policy advocates:

A Keynesian approach to fiscal policy would be for government budgets to consistently have a _____ role in the economy.

'Tax cuts - by providing incentives to work,save and invest - will raise employment and lower the price level.' This argument is made by the:

The difference between the domestic deficit and the overall deficit is:

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Many economists would argue that,if the government is to run an expansionary fiscal policy,spending should focus on:

If the economy is experiencing unemployment,then the most appropriate government policy would be to shift the aggregate:

To combat a recession,Keynesian fiscal policy recommends:

Countercyclical fiscal policy advocates running a balanced budget over the course of the business cycle.

If the government wants to run an expansionary fiscal policy by increasing consumption,the best alternative is likely to be:

An example of a long-term fiscal policy in Australia is:

The presence of automatic stabilisers 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.

Between 1975-6 and 1986-7,the federal budget was consistently:

Which of the following is not an example of a supply-side fiscal policy used in Australia?

Equal increases in government expenditures and taxes will:

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level.If the marginal propensity to consume is 0.75,federal policymakers can follow Keynesian economics and restrain inflation by:

The introduction of the GST in Australia is an example of:

Exhibit 17-1 Aggregate demand and supply model -Beginning at equilibrium E₁ in Exhibit 17-1,when the government increases spending or cuts taxes the economy will experience:

Australia's current national debt is:

Exhibit 17-2 Aggregate demand and supply model -Suppose the economy in Exhibit 17-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.75.Following Keynesian economics,the federal government can move the economy to point E₂ and reduce inflation by:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

International trade and finance

Applying graphs to economics

Filters

Exam 17: Macroeconomic policy II: fiscal policy

The Keynesian approach to fiscal policy advocates:

A Keynesian approach to fiscal policy would be for government budgets to consistently have a _____ role in the economy.

'Tax cuts - by providing incentives to work,save and invest - will raise employment and lower the price level.' This argument is made by the:

The difference between the domestic deficit and the overall deficit is:

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Many economists would argue that,if the government is to run an expansionary fiscal policy,spending should focus on:

If the economy is experiencing unemployment,then the most appropriate government policy would be to shift the aggregate:

To combat a recession,Keynesian fiscal policy recommends:

Countercyclical fiscal policy advocates running a balanced budget over the course of the business cycle.

If the government wants to run an expansionary fiscal policy by increasing consumption,the best alternative is likely to be:

An example of a long-term fiscal policy in Australia is:

The presence of automatic stabilisers 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.

Between 1975-6 and 1986-7,the federal budget was consistently:

Which of the following is not an example of a supply-side fiscal policy used in Australia?

Equal increases in government expenditures and taxes will:

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level.If the marginal propensity to consume is 0.75,federal policymakers can follow Keynesian economics and restrain inflation by:

The introduction of the GST in Australia is an example of:

Exhibit 17-1 Aggregate demand and supply model -Beginning at equilibrium E₁ in Exhibit 17-1,when the government increases spending or cuts taxes the economy will experience:

Australia's current national debt is:

Exhibit 17-2 Aggregate demand and supply model -Suppose the economy in Exhibit 17-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.75.Following Keynesian economics,the federal government can move the economy to point E₂ and reduce inflation by:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

International trade and finance

Applying graphs to economics

Filters