Question 1

The addition of imports reduces the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 2

Historically, the government has used fiscal policy to affect the economy through

Accepted Answer

A) central planning. 
B) indicative planning. 
C) aggregate demand. 
D) aggregate supply. 
A) central planning. 
B) indicative planning. 
C) aggregate demand. 
D) aggregate supply.

Question 3

When government spending is added to the basic macroeconomic model, the multiplier for G would

Accepted Answer

A) be higher than the multiplier for autonomous spending. 
B) be lower than the multiplier for autonomous spending. 
C) be equal to the multiplier for autonomous spending. 
D) have no relationship to the autonomous spending multiplier. 
A) be higher than the multiplier for autonomous spending. 
B) be lower than the multiplier for autonomous spending. 
C) be equal to the multiplier for autonomous spending. 
D) have no relationship to the autonomous spending multiplier.

Question 4

An increase in income taxes was part of President George W.Bush's plan in 2001 and 2008 to increase aggregate demand.

Accepted Answer

A) True 
 B)False

Question 5

Assume that the federal government wishes to counteract inflation with a policy that has the smallest impact on the federal budget.Which of the following would you recommend?

Accepted Answer

A) Increase transfer payments. 
B) Increase government purchases. 
C) Decrease government purchases. 
D) Decrease transfer payments. 
E) Increase personal income taxes. 
A) Increase transfer payments. 
B) Increase government purchases. 
C) Decrease government purchases. 
D) Decrease transfer payments. 
E) Increase personal income taxes.

Question 6

Tax cuts associated with supply-side economics often lead to increased

Accepted Answer

A) federal budget surpluses. 
B) federal budget deficits. 
C) foreign trade surpluses. 
D) government spending. 
A) federal budget surpluses. 
B) federal budget deficits. 
C) foreign trade surpluses. 
D) government spending.

Question 7

During the 2009-2010 debate on the stimulus package, democrats argued primarily for increased government spending.What effect would this have on the value of the multiplier?

Accepted Answer

A) It would decrease the value of the multiplier. 
B) It would have no effect on the multiplier. 
C) It would increase the value of the multiplier. 
D) The effect is uncertain. 
A) It would decrease the value of the multiplier. 
B) It would have no effect on the multiplier. 
C) It would increase the value of the multiplier. 
D) The effect is uncertain.

Question 8

A change in a fixed tax will cause the consumption schedule to

Accepted Answer

A) become steeper. 
B) become flatter. 
C) shift in a parallel manner. 
D) remain fixed as the economy moves along the schedule. 
A) become steeper. 
B) become flatter. 
C) shift in a parallel manner. 
D) remain fixed as the economy moves along the schedule.

Question 9

Fiscal policy consists of

Accepted Answer

A) taxes and interest rates. 
B) government purchases and defense spending. 
C) the money supply and taxes. 
D) taxes and government spending. 
A) taxes and interest rates. 
B) government purchases and defense spending. 
C) the money supply and taxes. 
D) taxes and government spending.

Question 10

An automatic stabilizer is a feature of the economy that

Accepted Answer

A) makes prices "sticky." 
B) reduces its sensitivity to shocks. 
C) maximizes its volatility. 
D) automatically reduces recessionary trends. 
A) makes prices "sticky." 
B) reduces its sensitivity to shocks. 
C) maximizes its volatility. 
D) automatically reduces recessionary trends.

Question 11

Capital gains tax cuts inevitably benefit

Accepted Answer

A) low-income workers. 
B) retired persons. 
C) workers in large cities. 
D) high-income stock owners. 
A) low-income workers. 
B) retired persons. 
C) workers in large cities. 
D) high-income stock owners.

Question 12

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

Accepted Answer

A) True 
 B)False

Question 13

What are the policies usually advocated by supply side economists?
 How do they justify these proposals?

Accepted Answer

Following are the usual suggestions: (a)

Question 14

If all fixed taxes in the United States were removed and only variable taxes remained, what would be the effect on the expenditures schedule?

Accepted Answer

A) The expenditure schedule will shift upward. 
B) The expenditure schedule will shift downward. 
C) The expenditure schedule will become flatter. 
D) The expenditure schedule will become steeper. 
A) The expenditure schedule will shift upward. 
B) The expenditure schedule will shift downward. 
C) The expenditure schedule will become flatter. 
D) The expenditure schedule will become steeper.

Question 15

You are a member of Congress in 2007-2009 when the economy is in a recessionary gap.If your goal is to achieve full employment, you should vote for

Accepted Answer

A) decreased government purchases, increased taxes, and a cut in transfer payments. 
B) a balanced federal budget. 
C) increased government purchases, decreased taxes, and an increase in transfer payments. 
D) increased government purchases and transfer payments, and an equal increase in taxes. 
A) decreased government purchases, increased taxes, and a cut in transfer payments. 
B) a balanced federal budget. 
C) increased government purchases, decreased taxes, and an increase in transfer payments. 
D) increased government purchases and transfer payments, and an equal increase in taxes.

Question 16

"Fiscal Policy" is the federal government's plan for

Accepted Answer

A) international trade, designed to balance exports and imports. 
B) spending and taxes, designed to influence the level of aggregate demand. 
C) manipulating the money supply and the control of interest rates. 
D) All of the above are correct. 
A) international trade, designed to balance exports and imports. 
B) spending and taxes, designed to influence the level of aggregate demand. 
C) manipulating the money supply and the control of interest rates. 
D) All of the above are correct.

Question 17

In 2000, many economists believed that the most serious macroeconomic problem confronting the U.S.economy was an inflationary gap.Which policies would be effective in dealing with this problem?

Accepted Answer

A) Increase transfer payments. 
B) Increase government purchases. 
C) Decrease personal income taxes. 
D) Increase personal income taxes. 
A) Increase transfer payments. 
B) Increase government purchases. 
C) Decrease personal income taxes. 
D) Increase personal income taxes.

Question 18

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

Accepted Answer

Conservatives tend to want a smaller gov

Question 19

If wealthy U.S.consumers save most of their tax cut, this means that, compared to government spending changes,

Accepted Answer

A) tax changes would have a higher multiplier effect. 
B) tax changes would have a weaker multiplier effect. 
C) government spending would have a weaker multiplier effect. 
D) U.S.consumers would spend all of their tax cut. 
A) tax changes would have a higher multiplier effect. 
B) tax changes would have a weaker multiplier effect. 
C) government spending would have a weaker multiplier effect. 
D) U.S.consumers would spend all of their tax cut.

Question 20

The Reagan tax cuts of the 1980s

Accepted Answer

A) had not impact on the budget deficit. 
B) decreased the budget deficit. 
C) increased the budget deficit. 
D) initially decreased the deficit but later increased it. 
A) had not impact on the budget deficit. 
B) decreased the budget deficit. 
C) increased the budget deficit. 
D) initially decreased the deficit but later increased it.

Exam 28: Managing Aggregate Demand: Fiscal Policy

The addition of imports reduces the value of the multiplier.

Historically, the government has used fiscal policy to affect the economy through

When government spending is added to the basic macroeconomic model, the multiplier for G would

An increase in income taxes was part of President George W.Bush's plan in 2001 and 2008 to increase aggregate demand.

Assume that the federal government wishes to counteract inflation with a policy that has the smallest impact on the federal budget.Which of the following would you recommend?

Tax cuts associated with supply-side economics often lead to increased

During the 2009-2010 debate on the stimulus package, democrats argued primarily for increased government spending.What effect would this have on the value of the multiplier?

A change in a fixed tax will cause the consumption schedule to

Fiscal policy consists of

An automatic stabilizer is a feature of the economy that

Capital gains tax cuts inevitably benefit

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

What are the policies usually advocated by supply side economists? How do they justify these proposals?

If all fixed taxes in the United States were removed and only variable taxes remained, what would be the effect on the expenditures schedule?

You are a member of Congress in 2007-2009 when the economy is in a recessionary gap.If your goal is to achieve full employment, you should vote for

"Fiscal Policy" is the federal government's plan for

In 2000, many economists believed that the most serious macroeconomic problem confronting the U.S.economy was an inflationary gap.Which policies would be effective in dealing with this problem?

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

If wealthy U.S.consumers save most of their tax cut, this means that, compared to government spending changes,

The Reagan tax cuts of the 1980s

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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