Question 1

An increase in government purchases will increase aggregate demand because

Accepted Answer

A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand. 
A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand.

Question 2

Crowding out refers to a decline in ________ as a result of an increase in ________.

Accepted Answer

A) tax revenues; unemployment 
B) government purchases; tax rates 
C) government purchases; private expenditures 
D) private expenditures; government purchases 
A) tax revenues; unemployment 
B) government purchases; tax rates 
C) government purchases; private expenditures 
D) private expenditures; government purchases

Question 3

Figure 18-6
  
-Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Accepted Answer

A) increase the money supply and decrease the interest rate. 
B) increase taxes. 
C) increase government spending. 
D) increase oil prices. 
E) raise interest rates. 
A) increase the money supply and decrease the interest rate. 
B) increase taxes. 
C) increase government spending. 
D) increase oil prices. 
E) raise interest rates.

Question 4

Crowding out will be greater

Accepted Answer

A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession, rather than at full employment. 
A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession, rather than at full employment.

Question 5

Expansionary fiscal policy will

Accepted Answer

A) shift the aggregate demand curve to the left. 
B) shift the aggregate demand curve to the right. 
C) not shift the aggregate demand curve. 
D) shift the short-run aggregate supply curve to the left. 
A) shift the aggregate demand curve to the left. 
B) shift the aggregate demand curve to the right. 
C) not shift the aggregate demand curve. 
D) shift the short-run aggregate supply curve to the left.

Question 6

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Accepted Answer

A) True 
 B)False

Question 7

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and the Congress to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what the president and the Congress are attempting to do.

Accepted Answer

The president and the Congress conduct e

Question 8

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

Accepted Answer

A) $500 billion. 
B) less than $500 billion. 
C) more than $500 billion. 
D) None of the above are correct.Congress must act to decrease government purchases in this case. 
A) $500 billion. 
B) less than $500 billion. 
C) more than $500 billion. 
D) None of the above are correct.Congress must act to decrease government purchases in this case.

Question 9

The cyclically adjusted budget is calculated at potential GDP.

Accepted Answer

A) True 
 B)False

Question 10

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

Accepted Answer

A) energy and the environment 
B) military, veterans, and homeland security 
C) health care, social services, and education 
D) transportation and housing 
A) energy and the environment 
B) military, veterans, and homeland security 
C) health care, social services, and education 
D) transportation and housing

Question 11

Which of the following is a government expenditure,but is not a government purchase?

Accepted Answer

A) The federal government buys a Humvee. 
B) The federal government pays the salary of an FBI agent. 
C) The federal government pays out an unemployment insurance claim. 
D) The Federal government pays to support research on Aids. 
A) The federal government buys a Humvee. 
B) The federal government pays the salary of an FBI agent. 
C) The federal government pays out an unemployment insurance claim. 
D) The Federal government pays to support research on Aids.

Question 12

if government spending and the price level increase,then

Accepted Answer

A) the interest rate increases, consumption declines, and investment spending declines. 
B) the interest rate decreases, consumption declines, and investment spending declines. 
C) the interest rate increases, consumption increases, and investment spending increases. 
D) the interest rate decreases, consumption increases, and investment spending increases. 
A) the interest rate increases, consumption declines, and investment spending declines. 
B) the interest rate decreases, consumption declines, and investment spending declines. 
C) the interest rate increases, consumption increases, and investment spending increases. 
D) the interest rate decreases, consumption increases, and investment spending increases.

Question 13

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

Accepted Answer

A) True 
 B)False

Question 14

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

Accepted Answer

A) Real equilibrium GDP will fall. 
B) Real equilibrium GDP will rise. 
C) There will be no change in real equilibrium GDP. 
D) Real equilibrium GDP will initially rise, but then fall below its previous equilibrium value. 
A) Real equilibrium GDP will fall. 
B) Real equilibrium GDP will rise. 
C) There will be no change in real equilibrium GDP. 
D) Real equilibrium GDP will initially rise, but then fall below its previous equilibrium value.

Question 15

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a ________ increase in government purchases would increase equilibrium real GDP by $157 billion

Accepted Answer

A) $1 billion. 
B) $10 billion. 
C) $100 billion. 
D) $157 billion. 
A) $1 billion. 
B) $10 billion. 
C) $100 billion. 
D) $157 billion.

Question 16

A government tax rebate of $1,000 would ________ your disposable income by ________.

Accepted Answer

A) increase; less than $1,000 
B) increase; $1,000 
C) decrease; less than $1,000 
D) decrease; $1,000 
A) increase; less than $1,000 
B) increase; $1,000 
C) decrease; less than $1,000 
D) decrease; $1,000

Question 17

The government purchases multiplier equals the change in ________ divided by the change in ________.

Accepted Answer

A) government purchases; equilibrium real GDP 
B) equilibrium real GDP; government purchases 
C) government purchases; consumption spending 
D) consumption spending; government purchases 
A) government purchases; equilibrium real GDP 
B) equilibrium real GDP; government purchases 
C) government purchases; consumption spending 
D) consumption spending; government purchases

Question 18

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 19

Prior to the 1930s,the majority of dollars spent by government was spent at the state and local levels.

Accepted Answer

A) True 
 B)False

Question 20

The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus.

Accepted Answer

A) increases; increases 
B) decreases; increases 
C) increases; decreases 
D) decreases; decreases 
A) increases; increases 
B) decreases; increases 
C) increases; decreases 
D) decreases; decreases

An increase in government purchases will increase aggregate demand because

Crowding out refers to a decline in as a result of an increase in .

Figure 18-6 -Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Crowding out will be greater

Expansionary fiscal policy will

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

The cyclically adjusted budget is calculated at potential GDP.

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

Which of the following is a government expenditure,but is not a government purchase?

if government spending and the price level increase,then

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a ________ increase in government purchases would increase equilibrium real GDP by $157 billion

A government tax rebate of $1,000 would your disposable income by .

The government purchases multiplier equals the change in divided by the change in .

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Prior to the 1930s,the majority of dollars spent by government was spent at the state and local levels.

The federal government debt when the federal government runs a deficit and when the federal government runs a surplus.

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

An increase in government purchases will increase aggregate demand because

Crowding out refers to a decline in ________ as a result of an increase in ________.

Figure 18-6 -Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Crowding out will be greater

Expansionary fiscal policy will

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

The cyclically adjusted budget is calculated at potential GDP.

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

Which of the following is a government expenditure,but is not a government purchase?

if government spending and the price level increase,then

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a ________ increase in government purchases would increase equilibrium real GDP by $157 billion

A government tax rebate of $1,000 would ________ your disposable income by ________.

The government purchases multiplier equals the change in ________ divided by the change in ________.

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Prior to the 1930s,the majority of dollars spent by government was spent at the state and local levels.

The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus.

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

Crowding out refers to a decline in as a result of an increase in .

A government tax rebate of $1,000 would your disposable income by .

The government purchases multiplier equals the change in divided by the change in .

The federal government debt when the federal government runs a deficit and when the federal government runs a surplus.