Question 1

Fiscal policy includes all of the following EXCEPT

Accepted Answer

A) changing taxes. 
B) changing government spending. 
C) policies that influence aggregate demand. 
D) policies that influence the rate of growth of the quantity of money in circulation. 
A) changing taxes. 
B) changing government spending. 
C) policies that influence aggregate demand. 
D) policies that influence the rate of growth of the quantity of money in circulation.

Question 2

Which of the following represent expansionary fiscal policy?

Accepted Answer

A) a reduction in government spending 
B) an increase in average individual income tax rates 
C) a cut in corporate income tax rates 
D) an increase in marginal individual income tax rates 
A) a reduction in government spending 
B) an increase in average individual income tax rates 
C) a cut in corporate income tax rates 
D) an increase in marginal individual income tax rates

Question 3

Which of the following would shift the aggregate demand curve to the right?

Accepted Answer

A) an increase in government spending 
B) an increase in taxes 
C) an increase in interest rates 
D) an increase in input prices 
A) an increase in government spending 
B) an increase in taxes 
C) an increase in interest rates 
D) an increase in input prices

Question 4

In the United States economy, the progressive income tax and unemployment compensation are both

Accepted Answer

A) destabilizers. 
B) discretionary presidential effectors. 
C) automatic stabilizers. 
D) time lag factors. 
A) destabilizers. 
B) discretionary presidential effectors. 
C) automatic stabilizers. 
D) time lag factors.

Question 5

-Consider the above figure. This curve suggests that as the government raises the tax rate, a point will eventually be reached at which the revenues that are collected will

Accepted Answer

A) increase. 
B) decline. 
C) approach infinity. 
D) become negative. 
A) increase. 
B) decline. 
C) approach infinity. 
D) become negative.

Question 6

The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, was formulated by

Accepted Answer

A) John Maynard Keynes 
B) Jean Baptiste Say. 
C) David Ricardo. 
D) Adam Smith. 
A) John Maynard Keynes 
B) Jean Baptiste Say. 
C) David Ricardo. 
D) Adam Smith.

Question 7

How might fiscal policy be used to correct an inflationary gap?

Accepted Answer

A) The exchange rate would be adjusted to encourage imports. 
B) The exchange rate would be adjusted to discourage imports. 
C) The interest rate would be adjusted to encourage saving. 
D) Taxes would be increased to reduce aggregate demand. 
A) The exchange rate would be adjusted to encourage imports. 
B) The exchange rate would be adjusted to discourage imports. 
C) The interest rate would be adjusted to encourage saving. 
D) Taxes would be increased to reduce aggregate demand.

Question 8

Which of the following is NOT related to fiscal policy?

Accepted Answer

A) passage of new securities laws 
B) decreasing marginal tax rates 
C) reducing the budget deficit 
D) increasing government expenditures 
A) passage of new securities laws 
B) decreasing marginal tax rates 
C) reducing the budget deficit 
D) increasing government expenditures

Question 9

In the traditional Keynesian model, an increase in current taxes

Accepted Answer

A) increases disposable income but does not affect consumption. 
B) decreases both disposable income and consumption. 
C) decreases disposable income but increases consumption. 
D) has no effect on either disposable income or consumption. 
A) increases disposable income but does not affect consumption. 
B) decreases both disposable income and consumption. 
C) decreases disposable income but increases consumption. 
D) has no effect on either disposable income or consumption.

Question 10

Automatic stabilizers are fiscal policy measures that

Accepted Answer

A) must be determined by the Congress in each budget. 
B) do not require new legislation. 
C) are determined by the Federal Reserve System. 
D) are part of discretionary fiscal policy. 
A) must be determined by the Congress in each budget. 
B) do not require new legislation. 
C) are determined by the Federal Reserve System. 
D) are part of discretionary fiscal policy.

Question 11

In the traditional Keynesian model, if the government increases spending, then

Accepted Answer

A) consumption will increase, and so real Gross Domestic Product (GDP)will increase by more than the increase in government spending. 
B) consumption will decrease, and so real Gross Domestic Product (GDP)will increase by less than the increase in government spending. 
C) consumption will remain the same, and so real Gross Domestic Product (GDP)will increase by the same amount of the increase in government spending. 
D) consumption will increase or decrease, and so real Gross Domestic Product (GDP)will increase or decrease depending on the change in consumption. 
A) consumption will increase, and so real Gross Domestic Product (GDP)will increase by more than the increase in government spending. 
B) consumption will decrease, and so real Gross Domestic Product (GDP)will increase by less than the increase in government spending. 
C) consumption will remain the same, and so real Gross Domestic Product (GDP)will increase by the same amount of the increase in government spending. 
D) consumption will increase or decrease, and so real Gross Domestic Product (GDP)will increase or decrease depending on the change in consumption.

Question 12

Suppose the economy has a high level of unemployment. This would imply

Accepted Answer

A) that the government should engage in expansionary fiscal policy and increase the tax rate. 
B) that the economy is operating to the left of the LRAS curve and that government spending could be increased to reduce unemployment. 
C) that fiscal policy has been ineffective and should be abandoned. 
D) that the economy is operating on the SRAS curve and that government spending could be decreased to reduce unemployment. 
A) that the government should engage in expansionary fiscal policy and increase the tax rate. 
B) that the economy is operating to the left of the LRAS curve and that government spending could be increased to reduce unemployment. 
C) that fiscal policy has been ineffective and should be abandoned. 
D) that the economy is operating on the SRAS curve and that government spending could be decreased to reduce unemployment.

Question 13

Expansionary fiscal policy falls short of its goal. Some economists claim it is due to indirect crowding out. What evidence would be consistent with this claim?

Accepted Answer

A) An increase in consumer spending occurred. 
B) The interest rate increased. 
C) Saving decreased. 
D) The price level decreased. 
A) An increase in consumer spending occurred. 
B) The interest rate increased. 
C) Saving decreased. 
D) The price level decreased.

Question 14

If the government increases spending but does not raise taxes

Accepted Answer

A) aggregate demand will increase without any effect on the price level. 
B) borrowing by the government will take place. 
C) the government will have to sell some assets, such as oil and national parks. 
D) the government will have to either lower expenditures or raise taxes the next year. 
A) aggregate demand will increase without any effect on the price level. 
B) borrowing by the government will take place. 
C) the government will have to sell some assets, such as oil and national parks. 
D) the government will have to either lower expenditures or raise taxes the next year.

Question 15

An increase in government spending would cause which of the following to happen?

Accepted Answer

A) The aggregate demand curve would shift to the right. 
B) The aggregate demand curve would shift to the left. 
C) The aggregate supply curve would shift to the right. 
D) The aggregate supply curve would shift to the left. 
A) The aggregate demand curve would shift to the right. 
B) The aggregate demand curve would shift to the left. 
C) The aggregate supply curve would shift to the right. 
D) The aggregate supply curve would shift to the left.

Question 16

Deficit financing

Accepted Answer

A) is when the government adjusts taxes to raise money to pay for government projects. 
B) is the mechanism behind the Laffer curve. 
C) is how the automatic stabilizers work. 
D) is when discretionary fiscal policy leads to spending more than is collected in taxes. 
A) is when the government adjusts taxes to raise money to pay for government projects. 
B) is the mechanism behind the Laffer curve. 
C) is how the automatic stabilizers work. 
D) is when discretionary fiscal policy leads to spending more than is collected in taxes.

Question 17

The Laffer curve shows a relationship between

Accepted Answer

A) government spending and real Gross Domestic Product (GDP). 
B) interest rates and investment spending. 
C) the price level and real Gross Domestic Product (GDP). 
D) tax rates and tax revenues. 
A) government spending and real Gross Domestic Product (GDP). 
B) interest rates and investment spending. 
C) the price level and real Gross Domestic Product (GDP). 
D) tax rates and tax revenues.

Question 18

What is discretionary fiscal policy and what is its purpose?

Accepted Answer

Discretionary fiscal policy is the delib

Question 19

Suppose there currently is an inflationary gap. What could the government do to bring the overall price level down?

Accepted Answer

A) nothing 
B) Reduce government spending. 
C) Increase government spending. 
D) Reduce the nation's aggregate supply. 
A) nothing 
B) Reduce government spending. 
C) Increase government spending. 
D) Reduce the nation's aggregate supply.

Question 20

The crowding-out effect refers to

Accepted Answer

A) an increase in the consumption of domestic goods at the expense of imported goods. 
B) an increase in the consumption of imported goods at the expense of domestic goods. 
C) a decrease in consumption and investment caused by an increase in government borrowing. 
D) a decrease in consumer spending caused by a decrease in consumer confidence. 
A) an increase in the consumption of domestic goods at the expense of imported goods. 
B) an increase in the consumption of imported goods at the expense of domestic goods. 
C) a decrease in consumption and investment caused by an increase in government borrowing. 
D) a decrease in consumer spending caused by a decrease in consumer confidence.

Fiscal policy includes all of the following EXCEPT

Which of the following represent expansionary fiscal policy?

Which of the following would shift the aggregate demand curve to the right?

In the United States economy, the progressive income tax and unemployment compensation are both

-Consider the above figure. This curve suggests that as the government raises the tax rate, a point will eventually be reached at which the revenues that are collected will

The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, was formulated by

How might fiscal policy be used to correct an inflationary gap?

Which of the following is NOT related to fiscal policy?

In the traditional Keynesian model, an increase in current taxes

Automatic stabilizers are fiscal policy measures that

In the traditional Keynesian model, if the government increases spending, then

Suppose the economy has a high level of unemployment. This would imply

Expansionary fiscal policy falls short of its goal. Some economists claim it is due to indirect crowding out. What evidence would be consistent with this claim?

If the government increases spending but does not raise taxes

An increase in government spending would cause which of the following to happen?

Deficit financing

The Laffer curve shows a relationship between

What is discretionary fiscal policy and what is its purpose?

Suppose there currently is an inflationary gap. What could the government do to bring the overall price level down?

The crowding-out effect refers to

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 12: Fiscal Policy

Fiscal policy includes all of the following EXCEPT

Which of the following represent expansionary fiscal policy?

Which of the following would shift the aggregate demand curve to the right?

In the United States economy, the progressive income tax and unemployment compensation are both

-Consider the above figure. This curve suggests that as the government raises the tax rate, a point will eventually be reached at which the revenues that are collected will

The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, was formulated by

How might fiscal policy be used to correct an inflationary gap?

Which of the following is NOT related to fiscal policy?

In the traditional Keynesian model, an increase in current taxes

Automatic stabilizers are fiscal policy measures that

In the traditional Keynesian model, if the government increases spending, then

Suppose the economy has a high level of unemployment. This would imply

Expansionary fiscal policy falls short of its goal. Some economists claim it is due to indirect crowding out. What evidence would be consistent with this claim?

If the government increases spending but does not raise taxes

An increase in government spending would cause which of the following to happen?

Deficit financing

The Laffer curve shows a relationship between

What is discretionary fiscal policy and what is its purpose?

Suppose there currently is an inflationary gap. What could the government do to bring the overall price level down?

The crowding-out effect refers to

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters