Question 1

The national debt is always a burden on future generations.

Accepted Answer

A) True 
 B)False

Question 2

Lower taxes create a multiplier effect in the economy.It leads to:

Accepted Answer

A) decreases in prices. 
B) technological advances. 
C) increases in aggregate demand. 
D) subsidies. 
A) decreases in prices. 
B) technological advances. 
C) increases in aggregate demand. 
D) subsidies.

Question 3

The issuing of government securities to the general public is considered _____ to the government.

Accepted Answer

A) an asset 
B) a liability 
C) inflationary 
D) as money financing 
A) an asset 
B) a liability 
C) inflationary 
D) as money financing

Question 4

Because of the automatic stabilisers,a decline in the level of economic activity will cause:

Accepted Answer

A) an increase in tax revenues collected. 
B) a decrease in government expenditures. 
C) a smaller budget deficit. 
D) an increase in welfare payments. 
A) an increase in tax revenues collected. 
B) a decrease in government expenditures. 
C) a smaller budget deficit. 
D) an increase in welfare payments.

Question 5

Exhibit 17-4 Aggregate demand and supply curves
  
-In Exhibit 17-4,supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

Accepted Answer

A) increased tax rates and increased the amount of government regulation. 
B) increased tax rates and decreased the amount of government regulation. 
C) increased tax rates only. 
D) decreased tax rates and decreased the amount of government regulation. 
E) decreased tax rates and increased the amount of government regulation. 
A) increased tax rates and increased the amount of government regulation. 
B) increased tax rates and decreased the amount of government regulation. 
C) increased tax rates only. 
D) decreased tax rates and decreased the amount of government regulation. 
E) decreased tax rates and increased the amount of government regulation.

Question 6

When the economy enters a prosperity phase,unemployment benefits:

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 7

The 'crowding out' of private investment is associated with:

Accepted Answer

A) a reduction in profitable investment opportunities due to a recession. 
B) increased competition from foreign investors in Australian markets. 
C) higher interest rates resulting from a declining rate of saving. 
D) higher interest rates resulting from increased borrowing by the federal government. 
E) higher interest rates resulting from restrictive monetary policy. 
A) a reduction in profitable investment opportunities due to a recession. 
B) increased competition from foreign investors in Australian markets. 
C) higher interest rates resulting from a declining rate of saving. 
D) higher interest rates resulting from increased borrowing by the federal government. 
E) higher interest rates resulting from restrictive monetary policy.

Question 8

The objectives of the GST in Australia were to:

Accepted Answer

A) reduce the range of goods and services attracting tax. 
B) discourage increased rates of community saving by taxing income when it was spent rather than when it was earned. 
C) increase the reliance on income taxation in government revenue raising. 
D) broaden the range of goods and services attracting tax. 
A) reduce the range of goods and services attracting tax. 
B) discourage increased rates of community saving by taxing income when it was spent rather than when it was earned. 
C) increase the reliance on income taxation in government revenue raising. 
D) broaden the range of goods and services attracting tax.

Question 9

The Laffer curve shows that as tax rates rise,tax revenue:

Accepted Answer

A) always rises. 
B) first rises, then falls and then rises again. 
C) always falls. 
D) first rises and then falls. 
E) remains at a constant level. 
A) always rises. 
B) first rises, then falls and then rises again. 
C) always falls. 
D) first rises and then falls. 
E) remains at a constant level.

Question 10

The result of the balanced-budget multiplier is that aggregate demand changes by the amount of the change in:

Accepted Answer

A) government spending. 
B) tax revenue. 
C) government spending plus tax revenue. 
D) government spending minus tax revenue. 
A) government spending. 
B) tax revenue. 
C) government spending plus tax revenue. 
D) government spending minus tax revenue.

Question 11

With low inflation and high unemployment,the most likely fiscal stance of the federal government would be:

Accepted Answer

A) neutral. 
B) expansionary. 
C) contractionary. 
D) pro-cyclical. 
A) neutral. 
B) expansionary. 
C) contractionary. 
D) pro-cyclical.

Question 12

A recent fiscal policy initiative in Australia is:

Accepted Answer

A) a short-term competition policy. 
B) a broadband initiative. 
C) a new competition policy. 
D) limited employment subsidies provided to employers to encourage the hiring of long-term unemployed. 
A) a short-term competition policy. 
B) a broadband initiative. 
C) a new competition policy. 
D) limited employment subsidies provided to employers to encourage the hiring of long-term unemployed.

Question 13

Personal income taxes:

Accepted Answer

A) make recessions and inflationary episodes more severe. 
B) make recessions and inflationary episodes less severe. 
C) make recessions more severe and inflationary episodes less severe. 
D) make recessions less severe and inflationary episodes more severe. 
E) have no effect on the severity of recessions and inflationary episodes. 
A) make recessions and inflationary episodes more severe. 
B) make recessions and inflationary episodes less severe. 
C) make recessions more severe and inflationary episodes less severe. 
D) make recessions less severe and inflationary episodes more severe. 
E) have no effect on the severity of recessions and inflationary episodes.

Question 14

The current stated fiscal policy of both major Australian political parties is to:

Accepted Answer

A) run deficits when economic growth is high. 
B) run surpluses when economic growth is low. 
C) have a balanced budget over each fiscal year. 
D) have a balanced budget over the course of the business cycle. 
E) always run surpluses. 
A) run deficits when economic growth is high. 
B) run surpluses when economic growth is low. 
C) have a balanced budget over each fiscal year. 
D) have a balanced budget over the course of the business cycle. 
E) always run surpluses.

Question 15

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 tax revenue by $6 billion. 
B) decreasing government tax revenue by $6.1 billion. 
C) decreasing government tax revenue by $200 billion. 
D) increasing government tax revenue by approximately $66 billion. 
E) decreasing government tax revenue by approximately $66 billion. 
A) increasing government tax revenue by $6 billion. 
B) decreasing government tax revenue by $6.1 billion. 
C) decreasing government tax revenue by $200 billion. 
D) increasing government tax revenue by approximately $66 billion. 
E) decreasing government tax revenue by approximately $66 billion.

Question 16

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Accepted Answer

A) $430 decline in real GDP. 
B) $430 increase in real GDP. 
C) 4.3 per cent increase in real GDP. 
D) 4.3 per cent decrease in real GDP. 
E) 43 per cent decrease in real GDP. 
A) $430 decline in real GDP. 
B) $430 increase in real GDP. 
C) 4.3 per cent increase in real GDP. 
D) 4.3 per cent decrease in real GDP. 
E) 43 per cent decrease in real GDP.

Question 17

Automatic stabilisers are:

Accepted Answer

A) state expenditures and revenues. 
B) similar to discretionary fiscal policy. 
C) federal expenditures and tax revenue that changes over the course of the business cycle. 
D) mechanisms allowed to accelerate the boom and amplify the recession. 
A) state expenditures and revenues. 
B) similar to discretionary fiscal policy. 
C) federal expenditures and tax revenue that changes over the course of the business cycle. 
D) mechanisms allowed to accelerate the boom and amplify the recession.

Question 18

Exhibit 17-3
  
-According to Exhibit 17-3,if we assume the MPC is 0.9,then a shift in the AD curve from AD₀ to AD₁ would require an increase in government spending of:

Accepted Answer

A) $50 billion. 
B) $10 billion. 
C) $5 billion. 
D) greater than $50 billion to allow for inflation. 
E) less than $10 billion to allow for inflation. 
A) $50 billion. 
B) $10 billion. 
C) $5 billion. 
D) greater than $50 billion to allow for inflation. 
E) less than $10 billion to allow for inflation.

Question 19

The supply-side fiscal policy:

Accepted Answer

A) accelerates consumers' confidence in obtaining more goods at lower prices. 
B) promotes taxes on producers but not consumers. 
C) aims to achieve higher aggregate supply to increase real output, full employment and lower prices. 
D) aims to achieve low aggregate supply to stabilise real output, full employment and lower prices. 
A) accelerates consumers' confidence in obtaining more goods at lower prices. 
B) promotes taxes on producers but not consumers. 
C) aims to achieve higher aggregate supply to increase real output, full employment and lower prices. 
D) aims to achieve low aggregate supply to stabilise real output, full employment and lower prices.

Question 20

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) The classical school. 
B) The Keynesian school. 
C) The neo-Keynesian school. 
D) The rational expectations school. 
E) The supply-side school. 
A) The classical school. 
B) The Keynesian school. 
C) The neo-Keynesian school. 
D) The rational expectations school. 
E) The supply-side school.

The national debt is always a burden on future generations.

Lower taxes create a multiplier effect in the economy.It leads to:

The issuing of government securities to the general public is considered _____ to the government.

Because of the automatic stabilisers,a decline in the level of economic activity will cause:

Exhibit 17-4 Aggregate demand and supply curves -In Exhibit 17-4,supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

When the economy enters a prosperity phase,unemployment benefits:

The 'crowding out' of private investment is associated with:

The objectives of the GST in Australia were to:

The Laffer curve shows that as tax rates rise,tax revenue:

The result of the balanced-budget multiplier is that aggregate demand changes by the amount of the change in:

With low inflation and high unemployment,the most likely fiscal stance of the federal government would be:

A recent fiscal policy initiative in Australia is:

Personal income taxes:

The current stated fiscal policy of both major Australian political parties is to:

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:

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Automatic stabilisers are:

Exhibit 17-3 -According to Exhibit 17-3,if we assume the MPC is 0.9,then a shift in the AD curve from AD₀ to AD₁ would require an increase in government spending of:

The supply-side fiscal policy:

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

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 national debt is always a burden on future generations.

Lower taxes create a multiplier effect in the economy.It leads to:

The issuing of government securities to the general public is considered _____ to the government.

Because of the automatic stabilisers,a decline in the level of economic activity will cause:

Exhibit 17-4 Aggregate demand and supply curves -In Exhibit 17-4,supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

When the economy enters a prosperity phase,unemployment benefits:

The 'crowding out' of private investment is associated with:

The objectives of the GST in Australia were to:

The Laffer curve shows that as tax rates rise,tax revenue:

The result of the balanced-budget multiplier is that aggregate demand changes by the amount of the change in:

With low inflation and high unemployment,the most likely fiscal stance of the federal government would be:

A recent fiscal policy initiative in Australia is:

Personal income taxes:

The current stated fiscal policy of both major Australian political parties is to:

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:

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Automatic stabilisers are:

Exhibit 17-3 -According to Exhibit 17-3,if we assume the MPC is 0.9,then a shift in the AD curve from AD₀ to AD₁ would require an increase in government spending of:

The supply-side fiscal policy:

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

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