Question 1

Social Security began as a "pay-as-you-go" system,meaning that payments to current retirees were paid

Accepted Answer

A)  from taxes collected from current workers. 
B)  from taxes collected from retired workers. 
C)  as long as the government had funds available. 
D)  as the government collected revenues from tariffs and excise taxes in the years Social Security payments were made. 
A)  from taxes collected from current workers. 
B)  from taxes collected from retired workers. 
C)  as long as the government had funds available. 
D)  as the government collected revenues from tariffs and excise taxes in the years Social Security payments were made.

Question 2

Figure 18-6
  
-Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

Accepted Answer

A)  the unemployment rate is very low. 
B)  firms are operating at below capacity. 
C)  the economy is below full employment. 
D)  income and profits are falling. 
E)  there is pressure on wages and prices to fall. 
A)  the unemployment rate is very low. 
B)  firms are operating at below capacity. 
C)  the economy is below full employment. 
D)  income and profits are falling. 
E)  there is pressure on wages and prices to fall.

Question 3

As spending on government purchases increases,income rises and money demand falls.

Accepted Answer

A) True 
 B)False

Question 4

Forecasts by the Congressional Budget Office show spending on Social Security,Medicare,and Medicaid rising from 10.4 percent of GDP in 2017 to ________ percent of GDP in 2090,and by 2090 the federal government will be spending,as a fraction of GDP,________ on these three programs as it currently spends on all programs combined.

Accepted Answer

A)  16.2 percent; nearly as much 
B)  16.2 percent; half as much 
C)  19.7 percent; nearly as much 
D)  19.7 percent; half as much 
A)  16.2 percent; nearly as much 
B)  16.2 percent; half as much 
C)  19.7 percent; nearly as much 
D)  19.7 percent; half as much

Question 5

The total value of U.S.Treasury bonds outstanding equals

Accepted Answer

A)  the federal government deficit. 
B)  the federal government surplus. 
C)  the federal government debt. 
D)  the cyclically adjusted budget deficit. 
A)  the federal government deficit. 
B)  the federal government surplus. 
C)  the federal government debt. 
D)  the cyclically adjusted budget deficit.

Question 6

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

Accepted Answer

Through the multiplier effect,the closin

Question 7

An increase in government purchases will increase aggregate demand because

Accepted Answer

A)  government expenditures are a component of aggregate demand. 
B)  consumption expenditures are a component of aggregate demand. 
C)  the decline in the price level will increase demand. 
D)  the decline in the interest rate will increase demand. 
A)  government expenditures are a component of aggregate demand. 
B)  consumption expenditures are a component of aggregate demand. 
C)  the decline in the price level will increase demand. 
D)  the decline in the interest rate will increase demand.

Question 8

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 9

What is the difference between fiscal policy and monetary policy?

Accepted Answer

Fiscal policy involves changes in federa

Question 10

The federal budget deficit acts as an automatic stabilizer because

Accepted Answer

A)  government tax revenues decrease during a recession. 
B)  unemployment insurance payments decrease during a recession. 
C)  food stamp payments increase during expansionary periods. 
D)  Medicaid payments increase during expansionary periods. 
A)  government tax revenues decrease during a recession. 
B)  unemployment insurance payments decrease during a recession. 
C)  food stamp payments increase during expansionary periods. 
D)  Medicaid payments increase during expansionary periods.

Question 11

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

Accepted Answer

A)  $250 billion 
B)  $400 billion 
C)  $640 billion 
D)  None of the above are correct. Taxes should be increased in this case. 
A)  $250 billion 
B)  $400 billion 
C)  $640 billion 
D)  None of the above are correct. Taxes should be increased in this case.

Question 12

The multiplier effect refers to the series of

Accepted Answer

A)  autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B)  induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C)  autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D)  induced increases in investment spending that result from an initial increase in autonomous expenditures. 
A)  autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B)  induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C)  autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D)  induced increases in investment spending that result from an initial increase in autonomous expenditures.

Question 13

Figure 18-1
  
-Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the basic AD-AS model in the figure above.

Accepted Answer

A)  E to B 
B)  B to C 
C)  A to B 
D)  B to A 
E)  C to D 
A)  E to B 
B)  B to C 
C)  A to B 
D)  B to A 
E)  C to D

Question 14

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 15

Which of the following is more likely to be effective in increasing the growth rate of real GDP?

Accepted Answer

A)  temporary cuts in income taxes 
B)  permanent cuts in business taxes 
C)  a one-time personal income tax rebate 
D)  All cuts in taxes are equally likely to increase the growth rate of real GDP. 
A)  temporary cuts in income taxes 
B)  permanent cuts in business taxes 
C)  a one-time personal income tax rebate 
D)  All cuts in taxes are equally likely to increase the growth rate of real GDP.

Question 16

Cutting taxes

Accepted Answer

A)  will lower disposable income and lower spending. 
B)  will raise disposable income and lower spending. 
C)  will lower disposable income and raise spending. 
D)  will raise disposable income and raise spending. 
A)  will lower disposable income and lower spending. 
B)  will raise disposable income and lower spending. 
C)  will lower disposable income and raise spending. 
D)  will raise disposable income and raise spending.

Question 17

The tax multiplier equals the change in ________ divided by the change in ________.

Accepted Answer

A)  taxes; equilibrium real GDP 
B)  equilibrium real GDP; taxes 
C)  taxes; consumption spending 
D)  consumption spending; taxes 
A)  taxes; equilibrium real GDP 
B)  equilibrium real GDP; taxes 
C)  taxes; consumption spending 
D)  consumption spending; taxes

Question 18

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the government wants to maintain a balanced budget.To achieve this goal,when the economy falls into recession government would need to ________ taxes,which would cause aggregate demand to ________.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase

Question 20

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant.)

Accepted Answer

A)  a $300 billion decrease in GDP 
B)  a $300 billion increase in GDP 
C)  a $30 billion increase in GDP 
D)  a $133.33 billion decrease in GDP 
E)  a $133.33 billion increase in GDP 
A)  a $300 billion decrease in GDP 
B)  a $300 billion increase in GDP 
C)  a $30 billion increase in GDP 
D)  a $133.33 billion decrease in GDP 
E)  a $133.33 billion increase in GDP

Social Security began as a "pay-as-you-go" system,meaning that payments to current retirees were paid

Figure 18-6 -Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

As spending on government purchases increases,income rises and money demand falls.

The total value of U.S.Treasury bonds outstanding equals

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

An increase in government purchases will increase aggregate demand because

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

What is the difference between fiscal policy and monetary policy?

The federal budget deficit acts as an automatic stabilizer because

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

The multiplier effect refers to the series of

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the basic AD-AS model in the figure above.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Which of the following is more likely to be effective in increasing the growth rate of real GDP?

Cutting taxes

The tax multiplier equals the change in divided by the change in .

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Suppose the government wants to maintain a balanced budget.To achieve this goal,when the economy falls into recession government would need to taxes,which would cause aggregate demand to .

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant.)

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 18: Fiscal Policy

Social Security began as a "pay-as-you-go" system,meaning that payments to current retirees were paid

Figure 18-6 -Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

As spending on government purchases increases,income rises and money demand falls.

The total value of U.S.Treasury bonds outstanding equals

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

An increase in government purchases will increase aggregate demand because

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

What is the difference between fiscal policy and monetary policy?

The federal budget deficit acts as an automatic stabilizer because

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

The multiplier effect refers to the series of

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the basic AD-AS model in the figure above.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Which of the following is more likely to be effective in increasing the growth rate of real GDP?

Cutting taxes

The tax multiplier equals the change in ________ divided by the change in ________.

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Suppose the government wants to maintain a balanced budget.To achieve this goal,when the economy falls into recession government would need to ________ taxes,which would cause aggregate demand to ________.

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant.)

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

The tax multiplier equals the change in divided by the change in .

Suppose the government wants to maintain a balanced budget.To achieve this goal,when the economy falls into recession government would need to taxes,which would cause aggregate demand to .