Question 1

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would a decrease in government purchases of $10 billion have on AD?

Accepted Answer

A) It would increase AD by $15 billion. 
B) It would decrease AD by $30 billion. 
C) It would decrease AD by $15 billion. 
D) It would increase AD by $30 billion. 
A) It would increase AD by $15 billion. 
B) It would decrease AD by $30 billion. 
C) It would decrease AD by $15 billion. 
D) It would increase AD by $30 billion.

Question 2

If MPC is 0.75,what size effect would a $40 billion decrease in government purchases have on the "first round" of induced added consumption?

Accepted Answer

A) $30 billion 
B) $40 billion 
C) $120 billion 
D) $160 billion 
A) $30 billion 
B) $40 billion 
C) $120 billion 
D) $160 billion

Question 3

What is the largest single component of federal expenditures?

Accepted Answer

A) foreign aid 
B) defence spending 
C) social services 
D) interest on the national debt 
A) foreign aid 
B) defence spending 
C) social services 
D) interest on the national debt

Question 4

If $10 billion of spending by the government results in a $40 billion increase in aggregate demand,what is the multiplier?

Accepted Answer

A) 0.25 
B) 1 
C) 4 
D) 3 
A) 0.25 
B) 1 
C) 4 
D) 3

Question 5

Which of the following is an example of a progressive tax?

Accepted Answer

A) an automobile emissions tax 
B) the federal income tax 
C) the harmonized sales tax 
D) a gasoline tax 
A) an automobile emissions tax 
B) the federal income tax 
C) the harmonized sales tax 
D) a gasoline tax

Question 6

When the crowding-out effect of a decrease in government purchases is included in the analysis,what is the effect on AD?

Accepted Answer

A) AD shifts right, but by less than the simple multiplier analysis would imply. 
B) AD doesn't change. 
C) AD shifts left. 
D) AD shifts right, but by more than the simple multiplier analysis would imply. 
A) AD shifts right, but by less than the simple multiplier analysis would imply. 
B) AD doesn't change. 
C) AD shifts left. 
D) AD shifts right, but by more than the simple multiplier analysis would imply.

Question 7

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would an increase in government purchases of $10 billion have on AD?

Accepted Answer

A) It would decrease AD by $15 billion. 
B) It would decrease AD by $30 billion. 
C) It would increase AD by $15 billion. 
D) It would increase AD by $30 billion. 
A) It would decrease AD by $15 billion. 
B) It would decrease AD by $30 billion. 
C) It would increase AD by $15 billion. 
D) It would increase AD by $30 billion.

Question 8

Under what circumstances will the multiplier be smaller,other things being equal?

Accepted Answer

A) the larger the fraction of each dollar of disposable income spent on consumption 
B) the larger the fraction of each dollar of disposable income that is spent on imports 
C) the smaller the fraction of each dollar of disposable income that goes to saving 
D) the smaller the fraction of each dollar earned that goes to taxes 
A) the larger the fraction of each dollar of disposable income spent on consumption 
B) the larger the fraction of each dollar of disposable income that is spent on imports 
C) the smaller the fraction of each dollar of disposable income that goes to saving 
D) the smaller the fraction of each dollar earned that goes to taxes

Question 9

Figure 10-2
  
-Refer to Figure 10-2.If the economy is above full-employment real GDP and a contractionary fiscal policy decreases aggregate demand from AD₁ to AD₀,what will the new short-run equilibrium be?

Accepted Answer

A) E0 and RGDPNR 
B) E2 and RGDP₁ 
C) E1 and RGDP₁ 
D) E2 and RGDPNR 
A) E0 and RGDPNR 
B) E2 and RGDP₁ 
C) E1 and RGDP₁ 
D) E2 and RGDPNR

Question 10

After income taxes,what is the next largest single source of revenue for the federal government?

Accepted Answer

A) social security contributions 
B) tariff revenues 
C) consumption taxes 
D) federal property taxes 
A) social security contributions 
B) tariff revenues 
C) consumption taxes 
D) federal property taxes

Question 11

A tax cut of $100 million will increase AD by $500 million if the MPC = 0.8.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following circumstances will shift AD to the right,other things being equal?

Accepted Answer

A) when the government budget deficit increases because transfer payments fell 
B) when the government budget deficit increases because taxes rose 
C) when the government budget deficit increases because GST revenue rose 
D) when the government budget deficit increases because government purchases rose 
A) when the government budget deficit increases because transfer payments fell 
B) when the government budget deficit increases because taxes rose 
C) when the government budget deficit increases because GST revenue rose 
D) when the government budget deficit increases because government purchases rose

Question 13

What impact will a contractionary fiscal policy,other things being equal,tend to have?

Accepted Answer

A) It will decrease net exports. 
B) It will increase interest rates. 
C) It will increase disposable income. 
D) It will decrease investment. 
A) It will decrease net exports. 
B) It will increase interest rates. 
C) It will increase disposable income. 
D) It will decrease investment.

Question 14

The larger the marginal propensity to consume,the larger the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 15

When the economy is at the full employment level of real GDP,expansionary fiscal policy will not increase the economy's total output in the long run.

Accepted Answer

A) True 
 B)False

Question 16

What effect would a cut in taxes combined with an increase in transfer payments have on AD?

Accepted Answer

A) It would decrease AD. 
B) It would increase AD. 
C) It would have an indeterminate effect on AD. 
D) It would leave AD unchanged. 
A) It would decrease AD. 
B) It would increase AD. 
C) It would have an indeterminate effect on AD. 
D) It would leave AD unchanged.

Question 17

Which of the following best describes the impact of the MPC on AD?

Accepted Answer

A) the greater the MPC, the greater the change in government purchases required to achieve a given change in AD 
B) the greater the MPC, the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption 
C) the smaller the MPC, the greater the fraction of an increase in AD due to an increase in government purchases that is consumption 
D) the smaller the MPC, the greater the change in government purchases required to achieve a given change in AD 
A) the greater the MPC, the greater the change in government purchases required to achieve a given change in AD 
B) the greater the MPC, the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption 
C) the smaller the MPC, the greater the fraction of an increase in AD due to an increase in government purchases that is consumption 
D) the smaller the MPC, the greater the change in government purchases required to achieve a given change in AD

Question 18

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in taxes?

Accepted Answer

A) Net exports will tend to move in the same direction as a change in taxes, and investment will tend to move in the opposite direction. 
B) Net exports will tend to move in the opposite direction as a change in taxes, and investment will tend to move in the same direction. 
C) Net exports and investment will tend to move in the same direction as a change in taxes. 
D) Net exports and investment will tend to move in the opposite direction from a change in taxes. 
A) Net exports will tend to move in the same direction as a change in taxes, and investment will tend to move in the opposite direction. 
B) Net exports will tend to move in the opposite direction as a change in taxes, and investment will tend to move in the same direction. 
C) Net exports and investment will tend to move in the same direction as a change in taxes. 
D) Net exports and investment will tend to move in the opposite direction from a change in taxes.

Question 19

What are the main components of spending that can cause changes in aggregate demand?

Accepted Answer

A) consumption, investment, government purchases, and net exports 
B) investment, savings, replacement of depreciated equipment, and spending 
C) consumption, savings, government purchases, and exports 
D) consumption, investment, government purchases, and imports 
A) consumption, investment, government purchases, and net exports 
B) investment, savings, replacement of depreciated equipment, and spending 
C) consumption, savings, government purchases, and exports 
D) consumption, investment, government purchases, and imports

Question 20

What does expansionary fiscal policy consist of?

Accepted Answer

A) decreased government purchases and increased taxes 
B) decreased government purchases and decreased taxes 
C) increased government purchases and increased taxes 
D) increased government purchases and decreased taxes 
A) decreased government purchases and increased taxes 
B) decreased government purchases and decreased taxes 
C) increased government purchases and increased taxes 
D) increased government purchases and decreased taxes

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would a decrease in government purchases of $10 billion have on AD?

If MPC is 0.75,what size effect would a $40 billion decrease in government purchases have on the "first round" of induced added consumption?

What is the largest single component of federal expenditures?

If $10 billion of spending by the government results in a $40 billion increase in aggregate demand,what is the multiplier?

Which of the following is an example of a progressive tax?

When the crowding-out effect of a decrease in government purchases is included in the analysis,what is the effect on AD?

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would an increase in government purchases of $10 billion have on AD?

Under what circumstances will the multiplier be smaller,other things being equal?

Figure 10-2 -Refer to Figure 10-2.If the economy is above full-employment real GDP and a contractionary fiscal policy decreases aggregate demand from AD₁ to AD₀,what will the new short-run equilibrium be?

After income taxes,what is the next largest single source of revenue for the federal government?

A tax cut of $100 million will increase AD by $500 million if the MPC = 0.8.

Which of the following circumstances will shift AD to the right,other things being equal?

What impact will a contractionary fiscal policy,other things being equal,tend to have?

The larger the marginal propensity to consume,the larger the multiplier effect.

When the economy is at the full employment level of real GDP,expansionary fiscal policy will not increase the economy's total output in the long run.

What effect would a cut in taxes combined with an increase in transfer payments have on AD?

Which of the following best describes the impact of the MPC on AD?

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in taxes?

What are the main components of spending that can cause changes in aggregate demand?

What does expansionary fiscal policy consist of?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 10: Fiscal Policy

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would a decrease in government purchases of $10 billion have on AD?

If MPC is 0.75,what size effect would a $40 billion decrease in government purchases have on the "first round" of induced added consumption?

What is the largest single component of federal expenditures?

If $10 billion of spending by the government results in a $40 billion increase in aggregate demand,what is the multiplier?

Which of the following is an example of a progressive tax?

When the crowding-out effect of a decrease in government purchases is included in the analysis,what is the effect on AD?

Starting at $30 billion less than full employment,if MPC is 2/3,what impact would an increase in government purchases of $10 billion have on AD?

Under what circumstances will the multiplier be smaller,other things being equal?

Figure 10-2 -Refer to Figure 10-2.If the economy is above full-employment real GDP and a contractionary fiscal policy decreases aggregate demand from AD₁ to AD₀,what will the new short-run equilibrium be?

After income taxes,what is the next largest single source of revenue for the federal government?

A tax cut of $100 million will increase AD by $500 million if the MPC = 0.8.

Which of the following circumstances will shift AD to the right,other things being equal?

What impact will a contractionary fiscal policy,other things being equal,tend to have?

The larger the marginal propensity to consume,the larger the multiplier effect.

When the economy is at the full employment level of real GDP,expansionary fiscal policy will not increase the economy's total output in the long run.

What effect would a cut in taxes combined with an increase in transfer payments have on AD?

Which of the following best describes the impact of the MPC on AD?

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in taxes?

What are the main components of spending that can cause changes in aggregate demand?

What does expansionary fiscal policy consist of?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters