Question 1

If the government decides to change the level of government spending, what happens to the value of the multiplier?

Accepted Answer

A) It becomes larger. 
B) It becomes smaller. 
C) It does not change. 
D) It is impossible to predict. 
A) It becomes larger. 
B) It becomes smaller. 
C) It does not change. 
D) It is impossible to predict.

Question 2

With regard to GDP, residential property taxes are an example of ____ taxes.

Accepted Answer

A) variable 
B) sales 
C) fixed 
D) disposable 
A) variable 
B) sales 
C) fixed 
D) disposable

Question 3

When total expenditures exceed the economy's potential GDP, the proper fiscal policy is to

Accepted Answer

A) increase transfer payments to the poor and elderly. 
B) cut personal income tax rates. 
C) decrease government purchases. 
D) increase purchasing power. 
A) increase transfer payments to the poor and elderly. 
B) cut personal income tax rates. 
C) decrease government purchases. 
D) increase purchasing power.

Question 4

When we add a personal income tax to the macroeconomic model, the

Accepted Answer

A) multiplier becomes larger. 
B) multiplier becomes smaller. 
C) expenditures schedule shifts upward. 
D) expenditures schedule becomes steeper. 
A) multiplier becomes larger. 
B) multiplier becomes smaller. 
C) expenditures schedule shifts upward. 
D) expenditures schedule becomes steeper.

Question 5

The central idea of supply-side tax cuts is that certain types of tax cuts will increase

Accepted Answer

A) aggregate demand. 
B) aggregate supply. 
C) the supply of imports. 
D) the supply of money. 
A) aggregate demand. 
B) aggregate supply. 
C) the supply of imports. 
D) the supply of money.

Question 6

Ronald Reagan's presidency could be characterized as a period of

Accepted Answer

A) passive monetary policy. 
B) passive fiscal policy. 
C) active fiscal policy. 
D) active regulatory policy. 
A) passive monetary policy. 
B) passive fiscal policy. 
C) active fiscal policy. 
D) active regulatory policy.

Question 7

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

Accepted Answer

A) 1,000 
B) 950 
C) 945.5 
D) 937.5 
E) 437.5 
A) 1,000 
B) 950 
C) 945.5 
D) 937.5 
E) 437.5

Question 8

There is some agreement between the beliefs of President George W.Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President

Accepted Answer

A) Keynes. 
B) Clinton. 
C) Reagan. 
D) Carter. 
A) Keynes. 
B) Clinton. 
C) Reagan. 
D) Carter.

Question 9

Figure 11-1
  
-In Figure 11-1, to reach the level of potential GDP, the administration of President Obama would most likely advocate

Accepted Answer

A) increasing Social Security payments. 
B) decreasing defense spending. 
C) decreasing personal income taxes. 
D) All of the above are correct. 
A) increasing Social Security payments. 
B) decreasing defense spending. 
C) decreasing personal income taxes. 
D) All of the above are correct.

Question 10

If the MPC in the U.S.was low, it would increase the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 11

The Japanese economy is stuck in a recessionary gap.The proper fiscal policy could include a(n)

Accepted Answer

A) decrease in taxes. 
B) increase in government purchases. 
C) increase in transfer payments. 
D) All of the above are correct. 
A) decrease in taxes. 
B) increase in government purchases. 
C) increase in transfer payments. 
D) All of the above are correct.

Question 12

Expansionary fiscal policy can cause a rise in real GDP in combination with

Accepted Answer

A) an increase in the price level. 
B) a decrease in the price level. 
C) no change in the price level. 
D) a decrease in the price level if the aggregate supply curve is upward sloping. 
A) an increase in the price level. 
B) a decrease in the price level. 
C) no change in the price level. 
D) a decrease in the price level if the aggregate supply curve is upward sloping.

Question 13

Which of the following factors has the most quantitative importance on the oversimplified multiplier formula?

Accepted Answer

A) ​it ignores variable imports 
B) ​it ignores price-level changes 
C) ​it ignores income taxes 
D) ​All of these equally affect the oversimplified multiplier formula 
A) ​it ignores variable imports 
B) ​it ignores price-level changes 
C) ​it ignores income taxes 
D) ​All of these equally affect the oversimplified multiplier formula

Question 14

Figure 11-3
  
-In Figure 11-3, which line represents the change in the consumption schedule caused by an increase in the residential property 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 15

Policy makers and citizens who want to expand the size of the government sector would favor stabilization policies that

Accepted Answer

A) raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap. 
B) raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary gap. 
C) reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary gap. 
D) reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary gap. 
A) raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap. 
B) raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary gap. 
C) reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary gap. 
D) reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary gap.

Question 16

The president wishes to increase spending for education by $4 billion but also maintain a balanced budget.Therefore, taxes will also be increased by $4 billion.What will happen to GDP?

Accepted Answer

A) It will increase. 
B) It will remain the same. 
C) It will decrease. 
D) It's impossible to know without the multiplier. 
A) It will increase. 
B) It will remain the same. 
C) It will decrease. 
D) It's impossible to know without the multiplier.

Question 17

According to supply siders, tax cuts should increase aggregate supply.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the U.S.personal income tax was eliminated and replaced with a fixed tax that raised the exact same amount of revenue.The multiplier would be

Accepted Answer

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

Question 19

At any given price level, equilibrium GDP on the expenditure side occurs when ____.

Accepted Answer

A) Y = C + I + G − (X − IM) 
B) Y = C + I − G 
C) Y = C + I + G + (X − IM) 
D) Y = C + X + G + (X − IM) 
A) Y = C + I + G − (X − IM) 
B) Y = C + I − G 
C) Y = C + I + G + (X − IM) 
D) Y = C + X + G + (X − IM)

Question 20

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

Accepted Answer

A) 2,950 
B) 2,750 
C) 2,550 
D) 2,350 
E) 2,150 
A) 2,950 
B) 2,750 
C) 2,550 
D) 2,350 
E) 2,150

Exam 28: Managing Aggregate Demand: Fiscal Policy

If the government decides to change the level of government spending, what happens to the value of the multiplier?

With regard to GDP, residential property taxes are an example of ____ taxes.

When total expenditures exceed the economy's potential GDP, the proper fiscal policy is to

When we add a personal income tax to the macroeconomic model, the

The central idea of supply-side tax cuts is that certain types of tax cuts will increase

Ronald Reagan's presidency could be characterized as a period of

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

There is some agreement between the beliefs of President George W.Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President

Figure 11-1 -In Figure 11-1, to reach the level of potential GDP, the administration of President Obama would most likely advocate

If the MPC in the U.S.was low, it would increase the value of the multiplier.

The Japanese economy is stuck in a recessionary gap.The proper fiscal policy could include a(n)

Expansionary fiscal policy can cause a rise in real GDP in combination with

Which of the following factors has the most quantitative importance on the oversimplified multiplier formula?

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

Policy makers and citizens who want to expand the size of the government sector would favor stabilization policies that

The president wishes to increase spending for education by $4 billion but also maintain a balanced budget.Therefore, taxes will also be increased by $4 billion.What will happen to GDP?

According to supply siders, tax cuts should increase aggregate supply.

Suppose that the U.S.personal income tax was eliminated and replaced with a fixed tax that raised the exact same amount of revenue.The multiplier would be

At any given price level, equilibrium GDP on the expenditure side occurs when ____.

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

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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