Question 1

Critics of supply-side policies argue that the effects of tax cuts are too small to be effective policy.

Accepted Answer

A) True 
 B)False

Question 2

-Refer to Table 11-1.What is the level of saving in this model?

Accepted Answer

A) 92.5 
B) 72.5 
C) 62.5 
D) 52.5 
E) 42.5 
A) 92.5 
B) 72.5 
C) 62.5 
D) 52.5 
E) 42.5

Question 3

Figure 11-3
  
-In Figure 11-3, which line represents the change in the consumption schedule caused by an increase in the personal income tax?

Accepted Answer

A) C₁ in graph (a) 
B) C2 in graph (a) 
C) C₁ in graph (b) 
D) C2 in graph (b) 
A) C₁ in graph (a) 
B) C2 in graph (a) 
C) C₁ in graph (b) 
D) C2 in graph (b)

Question 4

The Bush tax cuts

Accepted Answer

A) reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B) reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C) reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D) held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E) Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
A) reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B) reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C) reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D) held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E) Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers.

Question 5

Most economists seem to agree that cutting taxes

Accepted Answer

A) on saving has more impact than cutting taxes to increase investment. 
B) to stimulate investment is more effective than cutting taxes to stimulate work. 
C) to increase work is more effective than cutting taxes to stimulate investment. 
D) to increase work incentives is more effective than cutting taxes on saving. 
A) on saving has more impact than cutting taxes to increase investment. 
B) to stimulate investment is more effective than cutting taxes to stimulate work. 
C) to increase work is more effective than cutting taxes to stimulate investment. 
D) to increase work incentives is more effective than cutting taxes on saving.

Question 6

How will a cut in a fixed tax affect the consumption schedule?

Accepted Answer

A) It will shift downward. 
B) It will shift upward. 
C) It will become flatter. 
D) It will become steeper. 
A) It will shift downward. 
B) It will shift upward. 
C) It will become flatter. 
D) It will become steeper.

Question 7

Productivity increases, brought about by increased education and training, may shift the aggregate supply curve outward.

Accepted Answer

A) True 
 B)False

Question 8

The government's fiscal policy is its plan to influence aggregate demand by changing

Accepted Answer

A) the money supply. 
B) minimum wage levels. 
C) sales taxes. 
D) taxation and spending. 
A) the money supply. 
B) minimum wage levels. 
C) sales taxes. 
D) taxation and spending.

Question 9

Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit.Which action will have the larger effect on equilibrium GDP?

Accepted Answer

A) the increase in taxes 
B) the decrease in spending 
C) the effects will be equal 
D) not possible to determine without knowing the multiplier 
A) the increase in taxes 
B) the decrease in spending 
C) the effects will be equal 
D) not possible to determine without knowing the multiplier

Question 10

During the 2009-2010 stimulus debate, Republicans argued that increases in government spending would be more effective than decreases in taxes.

Accepted Answer

A) True 
 B)False

Question 11

Raising taxes or increasing transfer payments would reduce total spending.

Accepted Answer

A) True 
 B)False

Question 12

If increases in government spending lead to inflation, the value of the multiplier is reduced.

Accepted Answer

A) True 
 B)False

Question 13

If the Bush tax cuts were allowed to expire in 2010, the maximum personal income tax rate in the United States would have moved above 50 percent.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following observations is true?

Accepted Answer

A) Tax changes have no impact on the consumption schedule. 
B) Tax reduction shifts the consumption schedule upward. 
C) Changes in taxes have a multiplier effect on equilibrium GDP on the supply side. 
D) Tax increases increase equilibrium GDP. 
A) Tax changes have no impact on the consumption schedule. 
B) Tax reduction shifts the consumption schedule upward. 
C) Changes in taxes have a multiplier effect on equilibrium GDP on the supply side. 
D) Tax increases increase equilibrium GDP.

Question 15

In 2009, President Obama and Congress stimulated aggregate demand by

Accepted Answer

A) increasing taxes and government spending. 
B) decreasing taxes and government spending. 
C) increasing taxes and decreasing government spending. 
D) decreasing taxes and increasing government spending. 
A) increasing taxes and government spending. 
B) decreasing taxes and government spending. 
C) increasing taxes and decreasing government spending. 
D) decreasing taxes and increasing government spending.

Question 16

Figure 11-1
  
-In Figure 11-1, the slope of the expenditures schedule is .75 and the government wishes to achieve full employment.It should

Accepted Answer

A) cut spending by 1,000. 
B) increase spending by 1,000. 
C) cut taxes by 1,000. 
D) increase spending by 250. 
E) cut taxes by 250. 
A) cut spending by 1,000. 
B) increase spending by 1,000. 
C) cut taxes by 1,000. 
D) increase spending by 250. 
E) cut taxes by 250.

Question 17

Government purchases have the same multiplier effect as business investment spending.

Accepted Answer

A) True 
 B)False

Question 18

When the economy has an income tax that is variable, the multiplier is

Accepted Answer

A) unchanged. 
B) larger. 
C) smaller. 
D) unpredictable. 
A) unchanged. 
B) larger. 
C) smaller. 
D) unpredictable.

Question 19

Government transfer payments act as automatic stabilizers because as labor income decreases, transfer payments

Accepted Answer

A) decrease as well. 
B) remain constant. 
C) increase. 
D) to the government increase. 
A) decrease as well. 
B) remain constant. 
C) increase. 
D) to the government increase.

Question 20

When government increases a fixed tax, consumption schedule

Accepted Answer

A) shifts downward in a parallel manner. 
B) shifts upward in a parallel manner. 
C) becomes horizontal. 
D) becomes vertical. 
A) shifts downward in a parallel manner. 
B) shifts upward in a parallel manner. 
C) becomes horizontal. 
D) becomes vertical.

Exam 28: Managing Aggregate Demand: Fiscal Policy

Critics of supply-side policies argue that the effects of tax cuts are too small to be effective policy.

-Refer to Table 11-1.What is the level of saving in this model?

Figure 11-3 -In Figure 11-3, which line represents the change in the consumption schedule caused by an increase in the personal income tax?

The Bush tax cuts

Most economists seem to agree that cutting taxes

How will a cut in a fixed tax affect the consumption schedule?

Productivity increases, brought about by increased education and training, may shift the aggregate supply curve outward.

The government's fiscal policy is its plan to influence aggregate demand by changing

Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit.Which action will have the larger effect on equilibrium GDP?

During the 2009-2010 stimulus debate, Republicans argued that increases in government spending would be more effective than decreases in taxes.

Raising taxes or increasing transfer payments would reduce total spending.

If increases in government spending lead to inflation, the value of the multiplier is reduced.

If the Bush tax cuts were allowed to expire in 2010, the maximum personal income tax rate in the United States would have moved above 50 percent.

Which of the following observations is true?

In 2009, President Obama and Congress stimulated aggregate demand by

Figure 11-1 -In Figure 11-1, the slope of the expenditures schedule is .75 and the government wishes to achieve full employment.It should

Government purchases have the same multiplier effect as business investment spending.

When the economy has an income tax that is variable, the multiplier is

Government transfer payments act as automatic stabilizers because as labor income decreases, transfer payments

When government increases a fixed tax, consumption schedule

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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