Question 1

The deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

Accepted Answer

A) monetary policy. 
B) important international policy. 
C) continuous fiscal policy. 
D) discretionary fiscal policy. 
A) monetary policy. 
B) important international policy. 
C) continuous fiscal policy. 
D) discretionary fiscal policy.

Question 2

If the national debt is owed _____,then the burden of the debt will fall disproportionately on _____.

Accepted Answer

A) domestically; overseas interests 
B) overseas; overseas interests 
C) domestically; future generations 
D) overseas; future generations 
E) overseas; the current generation. 
A) domestically; overseas interests 
B) overseas; overseas interests 
C) domestically; future generations 
D) overseas; future generations 
E) overseas; the current generation.

Question 3

It is inflationary for government to increase spending if:

Accepted Answer

A) it also cuts taxes. 
B) the aggregate supply curve is flat. 
C) the economy is at full employment. 
D) the equilibrium real GDP is well below full employment. 
A) it also cuts taxes. 
B) the aggregate supply curve is flat. 
C) the economy is at full employment. 
D) the equilibrium real GDP is well below full employment.

Question 4

Assume the marginal propensity to consume (MPC)is 0.75 and the government increases taxes by $250 billion.The aggregate demand curve will shift to the:

Accepted Answer

A) left by $1000 billion. 
B) right by $1000 billion. 
C) left by $750 billion. 
D) right by $750 billion. 
A) left by $1000 billion. 
B) right by $1000 billion. 
C) left by $750 billion. 
D) right by $750 billion.

Question 5

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue.The result of this balanced-budget approach is a:

Accepted Answer

A) $10 billion decrease in aggregate demand. 
B) $20 billion decrease in aggregate demand. 
C) $100 billion decrease in aggregate demand. 
D) $10 billion increase in aggregate demand. 
A) $10 billion decrease in aggregate demand. 
B) $20 billion decrease in aggregate demand. 
C) $100 billion decrease in aggregate demand. 
D) $10 billion increase in aggregate demand.

Question 6

National debt is defined as:

Accepted Answer

A) total public and private debt owed to foreign institutions. 
B) the value of outstanding notes and coins issued by the RBA. 
C) the value of outstanding government securities. 
D) total private debt owed domestically and internationally. 
E) total private debt owed domestically. 
A) total public and private debt owed to foreign institutions. 
B) the value of outstanding notes and coins issued by the RBA. 
C) the value of outstanding government securities. 
D) total private debt owed domestically and internationally. 
E) total private debt owed domestically.

Question 7

Assume that we want to drive our economy out of recession by generating a $400 billion change in real GDP.The MPC is 0.8.Which of the following policy prescriptions would generate the targeted $400 billion change in income?

Accepted Answer

A) $120 billion increase in government spending and $50 billion increase in tax revenue. 
B) $140 billion increase in government spending and $70 billion increase in tax revenue. 
C) $160 billion increase in government spending and $120 billion increase in tax revenue. 
D) $220 billion increase in government spending and $100 billion increase in tax revenue. 
E) $400 billion increase in government spending and $300 billion increase in tax revenue. 
A) $120 billion increase in government spending and $50 billion increase in tax revenue. 
B) $140 billion increase in government spending and $70 billion increase in tax revenue. 
C) $160 billion increase in government spending and $120 billion increase in tax revenue. 
D) $220 billion increase in government spending and $100 billion increase in tax revenue. 
E) $400 billion increase in government spending and $300 billion increase in tax revenue.

Question 8

Which of the following statements is true?

Accepted Answer

A) A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. 
B) According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. 
C) The presence of the automatic stabilisers tends to destabilise the economy. 
D) To combat inflation, Keynesians recommend lower taxes and greater government spending. 
A) A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. 
B) According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. 
C) The presence of the automatic stabilisers tends to destabilise the economy. 
D) To combat inflation, Keynesians recommend lower taxes and greater government spending.

Question 9

The Federal Treasury budget:

Accepted Answer

A) is accepted by economists without a doubt. 
B) is not really important as it is just a forecast. 
C) is not a big media event. 
D) is scrutinised by economic analysts. 
A) is accepted by economists without a doubt. 
B) is not really important as it is just a forecast. 
C) is not a big media event. 
D) is scrutinised by economic analysts.

Question 10

If the treasurer announces a large,expected budget deficit 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 11

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

Accepted Answer

A) a decrease in the supply of labour. 
B) a decrease in the after-tax wage. 
C) a decrease in the AS curve. 
D) an increase in productive investment. 
A) a decrease in the supply of labour. 
B) a decrease in the after-tax wage. 
C) a decrease in the AS curve. 
D) an increase in productive investment.

Question 12

The balanced budget multiplier is always equal to:

Accepted Answer

A) 0.5. 
B) 0.75. 
C) 1. 
D) 1.5. 
E) 1 / MPC. 
A) 0.5. 
B) 0.75. 
C) 1. 
D) 1.5. 
E) 1 / MPC.

Question 13

Microeconomic reform in Australia included:

Accepted Answer

A) the reduction of tariffs. 
B) higher regulation of the Australian financial system. 
C) holding interest rate under controls. 
D) less flexibility in work practices. 
A) the reduction of tariffs. 
B) higher regulation of the Australian financial system. 
C) holding interest rate under controls. 
D) less flexibility in work practices.

Question 14

If the marginal propensity to consume (MPC)is 0.8 and the parliament votes for a $100 million tax cut.What is the change in aggregate demand?

Accepted Answer

A) $250 million. 
B) $200 million. 
C) $100 million. 
D) $80 million. 
A) $250 million. 
B) $200 million. 
C) $100 million. 
D) $80 million.

Question 15

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program,such as new interstate highway construction,the:

Accepted Answer

A) tax multiplier magnifies the effect of taxes on the level of real GDP. 
B) tax then generates a $100 million decline in real GDP. 
C) level of real GDP expands by $100 million. 
D) level of real GDP expands by $100 million multiplied by the MPC. 
E) tax multiplier overpowers the income multiplier, triggering a rollback in real GDP. 
A) tax multiplier magnifies the effect of taxes on the level of real GDP. 
B) tax then generates a $100 million decline in real GDP. 
C) level of real GDP expands by $100 million. 
D) level of real GDP expands by $100 million multiplied by the MPC. 
E) tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.

Question 16

The introduction of the GST in Australia in 2000 was designed to:

Accepted Answer

A) broaden the tax base. 
B) reduce the reliance on income tax to raise revenue. 
C) reduce the ability of people to avoid taxes. 
D) encourage private saving by taxing spending rather than income. 
E) do all of these things. 
A) broaden the tax base. 
B) reduce the reliance on income tax to raise revenue. 
C) reduce the ability of people to avoid taxes. 
D) encourage private saving by taxing spending rather than income. 
E) do all of these things.

Question 17

Which of the following is not an example of an automatic stabiliser?

Accepted Answer

A) Welfare payments. 
B) Unemployment benefits. 
C) Transfer payments. 
D) Highway construction. 
A) Welfare payments. 
B) Unemployment benefits. 
C) Transfer payments. 
D) Highway construction.

Question 18

As a proportion of GDP,if estimated revenues equal 30 per cent and estimated outlays equal 27 per cent,the cash balance of the budget is estimated to be:

Accepted Answer

A) a surplus of 57 per cent. 
B) a surplus of 3 per cent. 
C) a deficit of 3 per cent. 
D) a deficit of 57 per cent. 
E) indeterminate as not enough information is provided. 
A) a surplus of 57 per cent. 
B) a surplus of 3 per cent. 
C) a deficit of 3 per cent. 
D) a deficit of 57 per cent. 
E) indeterminate as not enough information is provided.

Question 19

According to supply-side fiscal policy,reducing tax rates on wages and profits will:

Accepted Answer

A) create demand-pull inflation. 
B) lower the price level but may trigger a recession. 
C) result in stagflation. 
D) reduce both unemployment and inflation. 
A) create demand-pull inflation. 
B) lower the price level but may trigger a recession. 
C) result in stagflation. 
D) reduce both unemployment and inflation.

Question 20

The cyclically adjusted budget deficit is the planned deficit for future times.

Accepted Answer

A) True 
 B)False

The deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

If the national debt is owed _,then the burden of the debt will fall disproportionately on _.

It is inflationary for government to increase spending if:

Assume the marginal propensity to consume (MPC)is 0.75 and the government increases taxes by $250 billion.The aggregate demand curve will shift to the:

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue.The result of this balanced-budget approach is a:

National debt is defined as:

Assume that we want to drive our economy out of recession by generating a $400 billion change in real GDP.The MPC is 0.8.Which of the following policy prescriptions would generate the targeted $400 billion change in income?

Which of the following statements is true?

The Federal Treasury budget:

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

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

The balanced budget multiplier is always equal to:

Microeconomic reform in Australia included:

If the marginal propensity to consume (MPC)is 0.8 and the parliament votes for a $100 million tax cut.What is the change in aggregate demand?

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program,such as new interstate highway construction,the:

The introduction of the GST in Australia in 2000 was designed to:

Which of the following is not an example of an automatic stabiliser?

As a proportion of GDP,if estimated revenues equal 30 per cent and estimated outlays equal 27 per cent,the cash balance of the budget is estimated to be:

According to supply-side fiscal policy,reducing tax rates on wages and profits will:

The cyclically adjusted budget deficit is the planned deficit for future times.

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 deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

If the national debt is owed _____,then the burden of the debt will fall disproportionately on _____.

It is inflationary for government to increase spending if:

Assume the marginal propensity to consume (MPC)is 0.75 and the government increases taxes by $250 billion.The aggregate demand curve will shift to the:

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue.The result of this balanced-budget approach is a:

National debt is defined as:

Assume that we want to drive our economy out of recession by generating a $400 billion change in real GDP.The MPC is 0.8.Which of the following policy prescriptions would generate the targeted $400 billion change in income?

Which of the following statements is true?

The Federal Treasury budget:

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

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

The balanced budget multiplier is always equal to:

Microeconomic reform in Australia included:

If the marginal propensity to consume (MPC)is 0.8 and the parliament votes for a $100 million tax cut.What is the change in aggregate demand?

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program,such as new interstate highway construction,the:

The introduction of the GST in Australia in 2000 was designed to:

Which of the following is not an example of an automatic stabiliser?

As a proportion of GDP,if estimated revenues equal 30 per cent and estimated outlays equal 27 per cent,the cash balance of the budget is estimated to be:

According to supply-side fiscal policy,reducing tax rates on wages and profits will:

The cyclically adjusted budget deficit is the planned deficit for future times.

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

If the national debt is owed _,then the burden of the debt will fall disproportionately on _.