Question 1

The domestic deficit is the:

Accepted Answer

A) sum of domestically derived revenue and domestic government expenditure. 
B) sum of domestically derived revenue and total government expenditure. 
C) difference between domestically derived revenue and total government expenditure. 
D) difference between domestically derived revenue and domestic government expenditure. 
A) sum of domestically derived revenue and domestic government expenditure. 
B) sum of domestically derived revenue and total government expenditure. 
C) difference between domestically derived revenue and total government expenditure. 
D) difference between domestically derived revenue and domestic government expenditure.

Question 2

When the economy enters a prosperity phase,personal income tax collections:

Accepted Answer

A) fall and so disposable income and spending fall more slowly than real GDP. 
B) fall and so disposable income and spending do not rise as rapidly as real GDP. 
C) rise and so disposable income and spending do not rise as rapidly as real GDP. 
D) rise and so disposable income and spending fall more slowly than real GDP. 
E) fall and so disposable income and spending fall at the same rate as real GDP. 
A) fall and so disposable income and spending fall more slowly than real GDP. 
B) fall and so disposable income and spending do not rise as rapidly as real GDP. 
C) rise and so disposable income and spending do not rise as rapidly as real GDP. 
D) rise and so disposable income and spending fall more slowly than real GDP. 
E) fall and so disposable income and spending fall at the same rate as real GDP.

Question 3

If the majority of national debt is held domestically,economists would consider this not to be a burden because:

Accepted Answer

A) we owe the debt to ourselves. 
B) it is only future generations that will have to repay the debt, not us. 
C) we can easily pay for this debt out of export income. 
D) the government knows how to spend the money better than us. 
A) we owe the debt to ourselves. 
B) it is only future generations that will have to repay the debt, not us. 
C) we can easily pay for this debt out of export income. 
D) the government knows how to spend the money better than us.

Question 4

Exhibit 17-1 Aggregate demand and supply model
  
-Suppose the economy in Exhibit 17-1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.8.Following Keynesian economics,to restore full employment,the government should cut taxes by:

Accepted Answer

A) $200 billion. 
B) $250 billion. 
C) $500 billion. 
D) $1 trillion. 
A) $200 billion. 
B) $250 billion. 
C) $500 billion. 
D) $1 trillion.

Question 5

According to the supply-side economists,substantial tax cuts will:

Accepted Answer

A) cause only the AD curve to increase. 
B) cause the AD curve to increase but the AS curve to decrease. 
C) cause both the AD and AS curves to increase. 
D) have little effect on either the AD or AS curves. 
E) cause only the AS curve to decrease. 
A) cause only the AD curve to increase. 
B) cause the AD curve to increase but the AS curve to decrease. 
C) cause both the AD and AS curves to increase. 
D) have little effect on either the AD or AS curves. 
E) cause only the AS curve to decrease.

Question 6

If government reduces taxes by $10 billion and the MPC is equal to 0.8,the spending is expected to increase by:

Accepted Answer

A) $0.8 billion. 
B) $5 billion. 
C) $8 billion. 
D) $10 billion. 
A) $0.8 billion. 
B) $5 billion. 
C) $8 billion. 
D) $10 billion.

Question 7

If the government is currently running an overall budget deficit,when inflation is rising and unemployment is low,then the cyclically adjusted budget deficit should indicate:

Accepted Answer

A) a contractionary fiscal stance. 
B) an expansionary fiscal stance. 
C) a neutral stance. 
D) a lower domestic deficit. 
A) a contractionary fiscal stance. 
B) an expansionary fiscal stance. 
C) a neutral stance. 
D) a lower domestic deficit.

Question 8

An advocate of supply-side fiscal policy would advocate which of the following?

Accepted Answer

A) More taxes on research and development activities. 
B) Stricter regulation. 
C) Increase in resource prices. 
D) Reduction in taxes. 
A) More taxes on research and development activities. 
B) Stricter regulation. 
C) Increase in resource prices. 
D) Reduction in taxes.

Question 9

Along with lower tax rates,supply-siders' policy recommendations include:

Accepted Answer

A) spending cuts and increased government regulation. 
B) lower resource prices and decreased government regulation. 
C) spending increases and decreased government regulation. 
D) spending increases and increased government regulation. 
A) spending cuts and increased government regulation. 
B) lower resource prices and decreased government regulation. 
C) spending increases and decreased government regulation. 
D) spending increases and increased government regulation.

Question 10

Australian microeconomic reforms can be viewed as:

Accepted Answer

A) new demand-side reforms. 
B) strictly political decision. 
C) supply-side fiscal policies. 
D) unnecessary spending. 
A) new demand-side reforms. 
B) strictly political decision. 
C) supply-side fiscal policies. 
D) unnecessary spending.

Question 11

Assume the economy is in recession and real GDP is below full employment.The marginal propensity to consume (MPC)is 0.75 and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending).If an increase of $1000 billion aggregate demand can restore full employment,the government should:

Accepted Answer

A) decrease spending by $750 billion. 
B) increase spending by $750 billion. 
C) increase spending by $1000 billion. 
D) increase spending by $250 billion. 
A) decrease spending by $750 billion. 
B) increase spending by $750 billion. 
C) increase spending by $1000 billion. 
D) increase spending by $250 billion.

Question 12

Unemployment benefits act as automatic stabilisers by:

Accepted Answer

A) allowing for more consumer spending during prosperity. 
B) increasing spending during a recession. 
C) making the unemployment rate worse during a recession. 
D) allowing for less consumer spending during a recession. 
E) changing the Phillips curve to a Laffer curve. 
A) allowing for more consumer spending during prosperity. 
B) increasing spending during a recession. 
C) making the unemployment rate worse during a recession. 
D) allowing for less consumer spending during a recession. 
E) changing the Phillips curve to a Laffer curve.

Question 13

Which of the following is true?

Accepted Answer

A) If the government has a budget deficit, the national debt is increased. 
B) National debt is a marginal value of outstanding Commonwealth Government securities. 
C) National debt represents the extent of future borrowing by the federal government. 
D) A full amount of national debt is held by the central bank. 
A) If the government has a budget deficit, the national debt is increased. 
B) National debt is a marginal value of outstanding Commonwealth Government securities. 
C) National debt represents the extent of future borrowing by the federal government. 
D) A full amount of national debt is held by the central bank.

Question 14

If the treasurer announces a large,expected budget surplus for the forthcoming year,this is a sign that the government's fiscal stance will be:

Accepted Answer

A) expansionary. 
B) contractionary. 
C) neutral. 
D) negative. 
E) indeterminate. 
A) expansionary. 
B) contractionary. 
C) neutral. 
D) negative. 
E) indeterminate.

Question 15

Money financing is financing a deficit by selling securities:

Accepted Answer

A) to the public. 
B) to the central bank. 
C) overseas. 
D) to the banks and to the public. 
A) to the public. 
B) to the central bank. 
C) overseas. 
D) to the banks and to the public.

Question 16

If no fiscal policy changes are made,suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation.If the marginal propensity to consume is 0.75,federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Accepted Answer

A) government spending by $250 billion. 
B) taxes by $100 billion. 
C) taxes by $1000 billion. 
D) government spending by $1000 billion. 
E) government spending by $750 billion. 
A) government spending by $250 billion. 
B) taxes by $100 billion. 
C) taxes by $1000 billion. 
D) government spending by $1000 billion. 
E) government spending by $750 billion.

Question 17

Increases in the fraction of national debt held by foreigners will _____ the burden of debt service on future generations _____.

Accepted Answer

A) decrease; because it is easier for the borrowing nation to default on the debt 
B) decrease; but may make the country more vulnerable to foreign intervention 
C) decrease; because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically 
D) increase; because taxes to pay the debt are collected within the country but more interest payments on the debt are sent outside 
E) increase; because foreign bond-holding pushes up interest rates at date of issue, increasing crowding out 
A) decrease; because it is easier for the borrowing nation to default on the debt 
B) decrease; but may make the country more vulnerable to foreign intervention 
C) decrease; because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically 
D) increase; because taxes to pay the debt are collected within the country but more interest payments on the debt are sent outside 
E) increase; because foreign bond-holding pushes up interest rates at date of issue, increasing crowding out

Question 18

'Crowding out' refers to a side-effect of fiscal rather than monetary policy because:

Accepted Answer

A) it is based on rising rather than falling interest rates. 
B) it is based on falling rather than rising interest rates. 
C) under monetary policy, private debt doesn't replace public debt. 
D) under monetary policy, the dollar appreciates rather than depreciates. 
E) monetary policy won't affect net exports. 
A) it is based on rising rather than falling interest rates. 
B) it is based on falling rather than rising interest rates. 
C) under monetary policy, private debt doesn't replace public debt. 
D) under monetary policy, the dollar appreciates rather than depreciates. 
E) monetary policy won't affect net exports.

Question 19

An expansionary fiscal policy is likely to be more effective if:

Accepted Answer

A) the government increases its spending on imports. 
B) the economy is running at its full employment level of output. 
C) the government increases its spending on locally produced goods and services. 
D) the government increases income tax rates. 
A) the government increases its spending on imports. 
B) the economy is running at its full employment level of output. 
C) the government increases its spending on locally produced goods and services. 
D) the government increases income tax rates.

Question 20

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

Accepted Answer

A) True 
 B)False

The domestic deficit is the:

When the economy enters a prosperity phase,personal income tax collections:

If the majority of national debt is held domestically,economists would consider this not to be a burden because:

Exhibit 17-1 Aggregate demand and supply model -Suppose the economy in Exhibit 17-1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.8.Following Keynesian economics,to restore full employment,the government should cut taxes by:

According to the supply-side economists,substantial tax cuts will:

If government reduces taxes by $10 billion and the MPC is equal to 0.8,the spending is expected to increase by:

If the government is currently running an overall budget deficit,when inflation is rising and unemployment is low,then the cyclically adjusted budget deficit should indicate:

An advocate of supply-side fiscal policy would advocate which of the following?

Along with lower tax rates,supply-siders' policy recommendations include:

Australian microeconomic reforms can be viewed as:

Unemployment benefits act as automatic stabilisers by:

Which of the following is true?

If the treasurer announces a large,expected budget surplus for the forthcoming year,this is a sign that the government's fiscal stance will be:

Money financing is financing a deficit by selling securities:

If no fiscal policy changes are made,suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation.If the marginal propensity to consume is 0.75,federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Increases in the fraction of national debt held by foreigners will _ the burden of debt service on future generations _.

'Crowding out' refers to a side-effect of fiscal rather than monetary policy because:

An expansionary fiscal policy is likely to be more effective if:

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

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 domestic deficit is the:

When the economy enters a prosperity phase,personal income tax collections:

If the majority of national debt is held domestically,economists would consider this not to be a burden because:

Exhibit 17-1 Aggregate demand and supply model -Suppose the economy in Exhibit 17-1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC)is 0.8.Following Keynesian economics,to restore full employment,the government should cut taxes by:

According to the supply-side economists,substantial tax cuts will:

If government reduces taxes by $10 billion and the MPC is equal to 0.8,the spending is expected to increase by:

If the government is currently running an overall budget deficit,when inflation is rising and unemployment is low,then the cyclically adjusted budget deficit should indicate:

An advocate of supply-side fiscal policy would advocate which of the following?

Along with lower tax rates,supply-siders' policy recommendations include:

Australian microeconomic reforms can be viewed as:

Unemployment benefits act as automatic stabilisers by:

Which of the following is true?

If the treasurer announces a large,expected budget surplus for the forthcoming year,this is a sign that the government's fiscal stance will be:

Money financing is financing a deficit by selling securities:

If no fiscal policy changes are made,suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation.If the marginal propensity to consume is 0.75,federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Increases in the fraction of national debt held by foreigners will _____ the burden of debt service on future generations _____.

'Crowding out' refers to a side-effect of fiscal rather than monetary policy because:

An expansionary fiscal policy is likely to be more effective if:

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

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

Increases in the fraction of national debt held by foreigners will _ the burden of debt service on future generations _.