A) raise disposable income and raise spending. B) raise disposable income and lower spending. C) lower disposable income and raise spending. D) lower disposable income and lower spending. A) raise disposable income and raise spending. B) raise disposable income and lower spending. C) lower disposable income and raise spending. D) lower disposable income and lower spending.

Exam 13: Fiscal Policy

Show the effects of tax reduction and simplification using the dynamic aggregate demand and supply model. To simplify the analysis, assume that the aggregate demand curve does not change. How does the analysis change if the tax change does not change labour supply and has little or no effect on savings and investment? _ _

(Essay)

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Question 21

Use the following information to explain and draw a graph showing the short-run and long-run Phillips curves. Natural rate of unemployment = 5% Current rate of unemployment = 3% Expected inflation rate = 2.9% Current inflation rate = 6.2% _ _

(Essay)

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Question 22

The nominal wage, expected inflation, and actual inflation for a hypothetical economy in 2018 are presented in the following table. Calculate the actual and expected real wage, assuming the price level is 100 in 2017. Explain how firms will use this information in terms of hiring and what will happen to the unemployment rate. _ _

(Essay)

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Question 23

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

(Multiple Choice)

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Question 24

Refer to Figure 13.6 for the following questions. Figure 13.6 -Suppose the federal government reduces income taxes. Assume that the movement from A to B in Figure 13.6 represents normal growth in the economy before the tax change. If the tax change is not effective and labour supply and savings do not increase because of the tax change, then the tax change will:

(Multiple Choice)

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Question 25

'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.

(True/False)

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Question 26

What is the government purchases multiplier if the tax rate is 0.20 and the marginal propensity to consume from disposable income is 0.80? Assume the economy is closed.

(Multiple Choice)

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Question 27

Suppose real GDP is $1.3 trillion and potential GDP is $1.35 trillion. If the government increases government purchases by $0.5 trillion, then the economy will be brought to equilibrium at potential GDP.

(True/False)

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Question 28

If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential GDP.

(Multiple Choice)

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Question 29

Refer to Figure 13.2 for the following question. Figure 13.2 -In Figure 13.2, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the government use to move the economy to point C?

(Multiple Choice)

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Question 30

Refer to Figure 13.7 for the following questions. Figure 13.7 -Suppose that the economy is at point A on the Phillips curve in Figure 13.7. If the aggregate demand curve shifts to right by the same amount as long-run aggregate supply, then the economy will:

(Multiple Choice)

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Question 31

Raising taxes will:

(Multiple Choice)

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Question 32

If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be and real GDP to be .

(Multiple Choice)

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Question 33

In 2015/2016, the largest share of Australian federal government welfare payments went to:

(Multiple Choice)

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Question 34

What did Milton Friedman and Edmund Phelps argue about the long-run Phillips curve? _ _

(Essay)

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Question 35

The structural budget deficit indicates what the budget deficit is during a recession.

(True/False)

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Question 36

Short-run resource crowding out is likely to be less of a problem when the economy is:

(Multiple Choice)

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Question 37

Both Milton Friedman and Edmund Phelps argued that if the long-run aggregate supply curve was vertical, then the slope of the long-run Phillips curve must be:

(Multiple Choice)

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Question 38

The government purchases multiplier will be larger if the marginal income tax rate increases.

(True/False)

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Question 39

Assume that the economy is in the state described by the following table. Draw a dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2, assuming that no policy is pursued. Then illustrate the appropriate fiscal policy to use in this situation. Assume that the policy results in the economy producing at potential GDP. Provide an explanation. _ _

(Essay)

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Question 40

Use the following information to explain and draw a graph showing the short-run and long-run Phillips curves. Natural rate of unemployment = 5% Current rate of unemployment = 3% Expected inflation rate = 2.9% Current inflation rate = 6.2% _ _

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

'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.

What is the government purchases multiplier if the tax rate is 0.20 and the marginal propensity to consume from disposable income is 0.80? Assume the economy is closed.

Suppose real GDP is $1.3 trillion and potential GDP is $1.35 trillion. If the government increases government purchases by $0.5 trillion, then the economy will be brought to equilibrium at potential GDP.

If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential GDP.

Refer to Figure 13.2 for the following question. Figure 13.2 -In Figure 13.2, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the government use to move the economy to point C?

Refer to Figure 13.7 for the following questions. Figure 13.7 -Suppose that the economy is at point A on the Phillips curve in Figure 13.7. If the aggregate demand curve shifts to right by the same amount as long-run aggregate supply, then the economy will:

Raising taxes will:

If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be and real GDP to be .

In 2015/2016, the largest share of Australian federal government welfare payments went to:

What did Milton Friedman and Edmund Phelps argue about the long-run Phillips curve? _ _

The structural budget deficit indicates what the budget deficit is during a recession.

Short-run resource crowding out is likely to be less of a problem when the economy is:

Both Milton Friedman and Edmund Phelps argued that if the long-run aggregate supply curve was vertical, then the slope of the long-run Phillips curve must be:

The government purchases multiplier will be larger if the marginal income tax rate increases.

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 13: Fiscal Policy

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

'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.

What is the government purchases multiplier if the tax rate is 0.20 and the marginal propensity to consume from disposable income is 0.80? Assume the economy is closed.

Suppose real GDP is $1.3 trillion and potential GDP is $1.35 trillion. If the government increases government purchases by $0.5 trillion, then the economy will be brought to equilibrium at potential GDP.

If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential GDP.

Refer to Figure 13.2 for the following question. Figure 13.2 -In Figure 13.2, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the government use to move the economy to point C?

Refer to Figure 13.7 for the following questions. Figure 13.7 -Suppose that the economy is at point A on the Phillips curve in Figure 13.7. If the aggregate demand curve shifts to right by the same amount as long-run aggregate supply, then the economy will:

Raising taxes will:

If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________.

In 2015/2016, the largest share of Australian federal government welfare payments went to:

What did Milton Friedman and Edmund Phelps argue about the long-run Phillips curve? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The structural budget deficit indicates what the budget deficit is during a recession.

Short-run resource crowding out is likely to be less of a problem when the economy is:

Both Milton Friedman and Edmund Phelps argued that if the long-run aggregate supply curve was vertical, then the slope of the long-run Phillips curve must be:

The government purchases multiplier will be larger if the marginal income tax rate increases.

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be and real GDP to be .

What did Milton Friedman and Edmund Phelps argue about the long-run Phillips curve? _ _