Question 1

The crowding out of private spending by government spending will be greater the

Accepted Answer

A) less sensitive consumption, investment, and net exports are to changes in interest rates. 
B) more sensitive consumption, investment, and net exports are to changes in interest rates. 
C) less sensitive consumption, investment, and net exports are to changes in the price level. 
D) more sensitive consumption, investment, and net exports are to changes in the price level. 
A) less sensitive consumption, investment, and net exports are to changes in interest rates. 
B) more sensitive consumption, investment, and net exports are to changes in interest rates. 
C) less sensitive consumption, investment, and net exports are to changes in the price level. 
D) more sensitive consumption, investment, and net exports are to changes in the price level.

Question 2

Figure 18-1
  
-Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Accepted Answer

A) E to B 
B) B to C 
C) A to B 
D) B to A 
E) C to D 
A) E to B 
B) B to C 
C) A to B 
D) B to A 
E) C to D

Question 3

An increase in government spending increases the supply of money in our economy.

Accepted Answer

A) True 
 B)False

Question 4

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

Accepted Answer

No,expansionary fiscal policy does not d

Question 5

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

Accepted Answer

A) True 
 B)False

Question 6

________ and ________ are the largest sources of revenue collected by the federal government.

Accepted Answer

A) Individual income taxes; corporate income taxes 
B) Individual income taxes; social insurance taxes 
C) Corporate income taxes; excise and other taxes 
D) Excise and other taxes; individual income taxes 
A) Individual income taxes; corporate income taxes 
B) Individual income taxes; social insurance taxes 
C) Corporate income taxes; excise and other taxes 
D) Excise and other taxes; individual income taxes

Question 7

Figure 18-1
  
-Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E. 
A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E.

Question 8

Which of the following best describes supply-side economics?

Accepted Answer

A) Labor productivity affects aggregate supply. 
B) Education affects labor productivity which affects aggregate supply. 
C) Education affects the incentive to work, save, and invest and, therefore, aggregate supply. 
D) Tax rates, particularly marginal tax rates, affect the incentive to work, save, and invest and, therefore, aggregate supply. 
A) Labor productivity affects aggregate supply. 
B) Education affects labor productivity which affects aggregate supply. 
C) Education affects the incentive to work, save, and invest and, therefore, aggregate supply. 
D) Tax rates, particularly marginal tax rates, affect the incentive to work, save, and invest and, therefore, aggregate supply.

Question 9

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would increase the size of the government purchases multiplier?

Accepted Answer

A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income 
A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income

Question 11

The tax multiplier equals the change in ________ divided by the change in ________.

Accepted Answer

A) taxes; equilibrium real GDP 
B) equilibrium real GDP; taxes 
C) taxes; consumption spending 
D) consumption spending; taxes 
A) taxes; equilibrium real GDP 
B) equilibrium real GDP; taxes 
C) taxes; consumption spending 
D) consumption spending; taxes

Question 12

The majority of the federal government debt is held by government agencies.

Accepted Answer

A) True 
 B)False

Question 13

The multiplier effect refers to the series of

Accepted Answer

A) autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B) induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C) autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D) induced increases in investment spending that result from an initial increase in autonomous expenditures. 
A) autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B) induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C) autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D) induced increases in investment spending that result from an initial increase in autonomous expenditures.

Question 14

The tax increases necessary to fund future Social Security and Medicare benefit payments would be

Accepted Answer

A) small, and have little effect on economic growth. 
B) small, but could discourage work effort, entrepreneurship and investment, thereby slowing economic growth. 
C) large, but would have little effect on economic growth. 
D) large, and could discourage work effort, entrepreneurship and investment, thereby slowing economic growth. 
A) small, and have little effect on economic growth. 
B) small, but could discourage work effort, entrepreneurship and investment, thereby slowing economic growth. 
C) large, but would have little effect on economic growth. 
D) large, and could discourage work effort, entrepreneurship and investment, thereby slowing economic growth.

Question 15

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

Accepted Answer

A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion. 
A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion.

Question 16

Federal government expenditures,as a percentage of GDP

Accepted Answer

A) have risen since the early 1950s to the present. 
B) have fallen since the early 1950s to the present. 
C) rose from 1950 to 1991, fell from 1992 to 2001, and have risen from 2001 to the present. 
D) rose from 1950 to 2001 and then fell from 2001 to the present. 
E) rose from 1950 to 1980, fell from 1981 to 2001, and have risen from 2001 to the present. 
A) have risen since the early 1950s to the present. 
B) have fallen since the early 1950s to the present. 
C) rose from 1950 to 1991, fell from 1992 to 2001, and have risen from 2001 to the present. 
D) rose from 1950 to 2001 and then fell from 2001 to the present. 
E) rose from 1950 to 1980, fell from 1981 to 2001, and have risen from 2001 to the present.

Question 17

Social Security

Accepted Answer

A) has not been successful in reducing poverty among elderly Americans. 
B) is a system whereby current retirees are paid from taxes collected from current workers. 
C) has a greater number of workers per retiree today as compared to when it started. 
D) currently pays retirees benefits equal to what they paid into the system. 
A) has not been successful in reducing poverty among elderly Americans. 
B) is a system whereby current retirees are paid from taxes collected from current workers. 
C) has a greater number of workers per retiree today as compared to when it started. 
D) currently pays retirees benefits equal to what they paid into the system.

Question 18

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

Accepted Answer

A) reduce investment in new capital. 
B) make domestic businesses less competitive in international markets as the dollar appreciates in value. 
C) raise interest rates and reduce consumer expenditures on automobiles and new houses. 
D) All of the above are correct. 
A) reduce investment in new capital. 
B) make domestic businesses less competitive in international markets as the dollar appreciates in value. 
C) raise interest rates and reduce consumer expenditures on automobiles and new houses. 
D) All of the above are correct.

Question 19

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

Accepted Answer

A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending. 
A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending.

Question 20

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Accepted Answer

A) rose; fell; risen 
B) fell; fell; risen 
C) rose; rose; fallen 
D) fell; rose; fallen 
A) rose; fell; risen 
B) fell; fell; risen 
C) rose; rose; fallen 
D) fell; rose; fallen

The crowding out of private spending by government spending will be greater the

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

An increase in government spending increases the supply of money in our economy.

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

and are the largest sources of revenue collected by the federal government.

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Which of the following best describes supply-side economics?

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Which of the following would increase the size of the government purchases multiplier?

The tax multiplier equals the change in divided by the change in .

The majority of the federal government debt is held by government agencies.

The multiplier effect refers to the series of

The tax increases necessary to fund future Social Security and Medicare benefit payments would be

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

Federal government expenditures,as a percentage of GDP

Social Security

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 18: Fiscal Policy

The crowding out of private spending by government spending will be greater the

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

An increase in government spending increases the supply of money in our economy.

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

________ and ________ are the largest sources of revenue collected by the federal government.

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Which of the following best describes supply-side economics?

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Which of the following would increase the size of the government purchases multiplier?

The tax multiplier equals the change in ________ divided by the change in ________.

The majority of the federal government debt is held by government agencies.

The multiplier effect refers to the series of

The tax increases necessary to fund future Social Security and Medicare benefit payments would be

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

Federal government expenditures,as a percentage of GDP

Social Security

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

and are the largest sources of revenue collected by the federal government.

The tax multiplier equals the change in divided by the change in .

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.