Question 1

Fiscal policy actions that are intended to have long-run effects attempt to increase ________ through changing ________.

Accepted Answer

A) aggregate demand; government spending 
B) aggregate supply; taxes 
C) aggregate demand; taxes 
D) aggregate supply; government spending 
A) aggregate demand; government spending 
B) aggregate supply; taxes 
C) aggregate demand; taxes 
D) aggregate supply; government spending

Question 2

To ameliorate the effects of a recession, a government could enact appropriate policies including:

Accepted Answer

A) increasing tax rates. 
B) increasing taxes by a fixed amount. 
C) increasing government purchases. 
D) decreasing defence spending. 
A) increasing tax rates. 
B) increasing taxes by a fixed amount. 
C) increasing government purchases. 
D) decreasing defence spending.

Question 3

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 the right by more than the long-run aggregate supply curve does, then the economy will:

Accepted Answer

A) remain at point A on the Phillips curve. 
B) move to point B on the Phillips curve. 
C) move to point C on the Phillips curve. 
D) move to point D on the Phillips curve. 
A) remain at point A on the Phillips curve. 
B) move to point B on the Phillips curve. 
C) move to point C on the Phillips curve. 
D) move to point D on the Phillips curve.

Question 4

The ________ the tax wedge, the smaller the difference between pre-tax and post-tax returns for an economic activity, the ________ of that activity will occur.

Accepted Answer

A) smaller; more 
B) smaller; less 
C) larger; more 
D) larger; less 
A) smaller; more 
B) smaller; less 
C) larger; more 
D) larger; less

Question 5

A number of governments in Europe from 2009 onward, including Ireland, faced loan defaults as they could not repay the interest on their loans and required assistance from the European Union and the International Monetary Fund. Which of the following is true of the situation facing Ireland at that time?

Accepted Answer

A) The Irish government took on huge debts to bail out failing banks. 
B) The Irish government had previously increased public sector wages and lowered tax rates. 
C) By 2010, the budget deficit was over 30% of Ireland's GDP. 
D) All of these options are correct. 
A) The Irish government took on huge debts to bail out failing banks. 
B) The Irish government had previously increased public sector wages and lowered tax rates. 
C) By 2010, the budget deficit was over 30% of Ireland's GDP. 
D) All of these options are correct.

Question 6

It can be ________ difficult to effectively time fiscal policy than monetary policy because ________.

Accepted Answer

A) more; fiscal policy can be quickly decided and changed 
B) more; fiscal policy takes longer to implement 
C) less; monetary policy takes longer to decide and change 
D) less; monetary policy takes longer to implement 
A) more; fiscal policy can be quickly decided and changed 
B) more; fiscal policy takes longer to implement 
C) less; monetary policy takes longer to decide and change 
D) less; monetary policy takes longer to implement

Question 7

Government deficits tend to increase during:

Accepted Answer

A) recessions and booms. 
B) periods of economic contraction and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty. 
A) recessions and booms. 
B) periods of economic contraction and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty.

Question 8

Government net debt in Australia was highest in which of the following time periods?

Accepted Answer

A) 1982/1983. 
B) 1996/1997. 
C) 2015/2016. 
D) 2005/2006. 
A) 1982/1983. 
B) 1996/1997. 
C) 2015/2016. 
D) 2005/2006.

Question 9

A contractionary fiscal policy would cause the:

Accepted Answer

A) aggregate demand curve to the right. 
B) aggregate demand curve to the left. 
C) short-run aggregate supply curve to the right. 
D) short-run aggregate supply curve to the left. 
A) aggregate demand curve to the right. 
B) aggregate demand curve to the left. 
C) short-run aggregate supply curve to the right. 
D) short-run aggregate supply curve to the left.

Question 10

What is the structural budget deficit or surplus?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

This is the deficit or surplus

Question 11

What is 'contractionary fiscal policy' and under what circumstances would it be used?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Contractionary fiscal policy involves re

Question 12

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 the right by less than the long-run aggregate supply, then the economy will:

Accepted Answer

A) remain at point A on the Phillips curve. 
B) move to point B on the Phillips curve. 
C) move to point C on the Phillips curve. 
D) move to point D on the Phillips curve. 
A) remain at point A on the Phillips curve. 
B) move to point B on the Phillips curve. 
C) move to point C on the Phillips curve. 
D) move to point D on the Phillips curve.

Question 13

Suppose that you are an economic advisor for a political candidate in the early 1960s. Your candidate understands the political value of a very low unemployment rate. Currently, the unemployment rate is a bit high and he/she wants to advocate policies to lower it permanently. How do you advise your candidate about what the cost of such a choice is, given the economic understanding of the day?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Since this is the 1960s, the view of mos

Question 14

Accumulating debt can be a problem for the federal government because:

Accepted Answer

A) it is currently in danger of defaulting on the debt. 
B) a large debt to GDP ratio causes crowding out. 
C) purchases of roads and bridges add burden but no benefit to the economy. 
D) raising the money to borrow is difficult. 
A) it is currently in danger of defaulting on the debt. 
B) a large debt to GDP ratio causes crowding out. 
C) purchases of roads and bridges add burden but no benefit to the economy. 
D) raising the money to borrow is difficult.

Question 15

An increase in income taxes will reduce the rate of increase in aggregate demand but will have no effect on aggregate supply.

Accepted Answer

A) True 
 B)False

Question 16

Just as real GDP ________ potential GDP in the long run, the unemployment rate ________ the natural rate of unemployment in the long-run.

Accepted Answer

A) is not related to; is not related to 
B) is greater than; is greater than 
C) equals; equals 
D) is less than; is less than 
A) is not related to; is not related to 
B) is greater than; is greater than 
C) equals; equals 
D) is less than; is less than

Question 17

If real equilibrium GDP is below the long-run aggregate supply curve, an appropriate fiscal policy would be to:

Accepted Answer

A) increase government purchases and increase a budget deficit. 
B) pursue a contractionary fiscal policy by increasing the budget surplus. 
C) increase individual income taxes to balance the budget. 
D) increase business income taxes to increase tax fairness. 
A) increase government purchases and increase a budget deficit. 
B) pursue a contractionary fiscal policy by increasing the budget surplus. 
C) increase individual income taxes to balance the budget. 
D) increase business income taxes to increase tax fairness.

Question 18

An initial increase in government purchases of $200 billion will shift the aggregate demand curve to the right by:

Accepted Answer

A) $200 billion. 
B) less than $200 billion. 
C) more than $200 billion. 
D) None of these options is correct. This policy shifts the long-run aggregate supply curve. 
A) $200 billion. 
B) less than $200 billion. 
C) more than $200 billion. 
D) None of these options is correct. This policy shifts the long-run aggregate supply curve.

Question 19

A cut in tax rates affects equilibrium real GDP through two channels: ________ disposable income and consumer spending, and ________ the size of the multiplier effect.

Accepted Answer

A) decreasing; increasing 
B) decreasing; decreasing 
C) increasing; increasing 
D) increasing; decreasing 
A) decreasing; increasing 
B) decreasing; decreasing 
C) increasing; increasing 
D) increasing; decreasing

Question 20

To help fight a recession, the government could:

Accepted Answer

A) increase taxes to increase aggregate demand. 
B) increase government spending and run a budget deficit. 
C) lower interest rates by decreasing the cash rate. 
D) conduct contractionary fiscal policy by raising taxes. 
A) increase taxes to increase aggregate demand. 
B) increase government spending and run a budget deficit. 
C) lower interest rates by decreasing the cash rate. 
D) conduct contractionary fiscal policy by raising taxes.

Fiscal policy actions that are intended to have long-run effects attempt to increase through changing .

To ameliorate the effects of a recession, a government could enact appropriate policies including:

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 the right by more than the long-run aggregate supply curve does, then the economy will:

The the tax wedge, the smaller the difference between pre-tax and post-tax returns for an economic activity, the of that activity will occur.

It can be difficult to effectively time fiscal policy than monetary policy because .

Government deficits tend to increase during:

Government net debt in Australia was highest in which of the following time periods?

A contractionary fiscal policy would cause the:

What is the structural budget deficit or surplus? _ _

What is 'contractionary fiscal policy' and under what circumstances would it be used? _ _

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 the right by less than the long-run aggregate supply, then the economy will:

Accumulating debt can be a problem for the federal government because:

An increase in income taxes will reduce the rate of increase in aggregate demand but will have no effect on aggregate supply.

Just as real GDP potential GDP in the long run, the unemployment rate the natural rate of unemployment in the long-run.

If real equilibrium GDP is below the long-run aggregate supply curve, an appropriate fiscal policy would be to:

An initial increase in government purchases of $200 billion will shift the aggregate demand curve to the right by:

A cut in tax rates affects equilibrium real GDP through two channels: disposable income and consumer spending, and the size of the multiplier effect.

To help fight a recession, the government could:

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

Fiscal policy actions that are intended to have long-run effects attempt to increase ________ through changing ________.

To ameliorate the effects of a recession, a government could enact appropriate policies including:

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 the right by more than the long-run aggregate supply curve does, then the economy will:

The ________ the tax wedge, the smaller the difference between pre-tax and post-tax returns for an economic activity, the ________ of that activity will occur.

It can be ________ difficult to effectively time fiscal policy than monetary policy because ________.

Government deficits tend to increase during:

Government net debt in Australia was highest in which of the following time periods?

A contractionary fiscal policy would cause the:

What is the structural budget deficit or surplus? _____________________________________________________________________________________________ _____________________________________________________________________________________________

What is 'contractionary fiscal policy' and under what circumstances would it be used? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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 the right by less than the long-run aggregate supply, then the economy will:

Accumulating debt can be a problem for the federal government because:

An increase in income taxes will reduce the rate of increase in aggregate demand but will have no effect on aggregate supply.

Just as real GDP ________ potential GDP in the long run, the unemployment rate ________ the natural rate of unemployment in the long-run.

If real equilibrium GDP is below the long-run aggregate supply curve, an appropriate fiscal policy would be to:

An initial increase in government purchases of $200 billion will shift the aggregate demand curve to the right by:

A cut in tax rates affects equilibrium real GDP through two channels: ________ disposable income and consumer spending, and ________ the size of the multiplier effect.

To help fight a recession, the government could:

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

Fiscal policy actions that are intended to have long-run effects attempt to increase through changing .

The the tax wedge, the smaller the difference between pre-tax and post-tax returns for an economic activity, the of that activity will occur.

It can be difficult to effectively time fiscal policy than monetary policy because .

What is the structural budget deficit or surplus? _ _

What is 'contractionary fiscal policy' and under what circumstances would it be used? _ _

Just as real GDP potential GDP in the long run, the unemployment rate the natural rate of unemployment in the long-run.

A cut in tax rates affects equilibrium real GDP through two channels: disposable income and consumer spending, and the size of the multiplier effect.