Question 1

A cut in tax rates effects equilibrium real GDP through two channels: ________ disposable income and consumer spending,and ________ the size of the multiplier effect.

Accepted Answer

A)  decreasing; increasing 
B)  decreasing; decreasing 
C)  increasing; increasing 
D)  increasing; decreasing 
A)  decreasing; increasing 
B)  decreasing; decreasing 
C)  increasing; increasing 
D)  increasing; decreasing

Question 2

A government tax rebate of $1,000 would ________ your disposable income by ________.

Accepted Answer

A)  increase; less than $1,000 
B)  increase; $1,000 
C)  decrease; less than $1,000 
D)  decrease; $1,000 
A)  increase; less than $1,000 
B)  increase; $1,000 
C)  decrease; less than $1,000 
D)  decrease; $1,000

Question 3

Figure 18-12
  
-Refer to Figure 18-12.An increase in government purchases causes aggregate demand to shift ultimately from AD₁ to AD₂.In the new equilibrium at point B,both real GDP and the price level have increased.The increase in real GDP is ________ than that indicated by the multiplier effect with a constant price level.

Accepted Answer

A)  equal to 
B)  less than 
C)  greater than 
D)  There is insufficient information given here to draw a conclusion. 
A)  equal to 
B)  less than 
C)  greater than 
D)  There is insufficient information given here to draw a conclusion.

Question 4

The federal government debt as a percentage of GDP did not rise

Accepted Answer

A)  during the Great Depression. 
B)  during World War II. 
C)  during the 1960s. 
D)  during the 1980s. 
A)  during the Great Depression. 
B)  during World War II. 
C)  during the 1960s. 
D)  during the 1980s.

Question 5

The total value of U.S.Treasury bonds outstanding is called the federal government debt.

Accepted Answer

A) True 
 B)False

Question 6

Figure 18-5
  
-Refer to Figure 18-5.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,Congress and the president would most likely pursue

Accepted Answer

A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy. 
E)  contractionary automatic stabilizers. 
A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  expansionary monetary policy. 
D)  contractionary monetary policy. 
E)  contractionary automatic stabilizers.

Question 7

During 1970-1997,the U.S.federal government was

Accepted Answer

A)  in surplus every year. 
B)  balanced every year. 
C)  in deficit every year. 
D)  in deficit most of those years. 
A)  in surplus every year. 
B)  balanced every year. 
C)  in deficit every year. 
D)  in deficit most of those years.

Question 8

Expansionary fiscal policy

Accepted Answer

A)  can be effective in the short run. 
B)  causes complete crowding out in the short run. 
C)  is never effective because of crowding out. 
D)  can be effective in the long run. 
A)  can be effective in the short run. 
B)  causes complete crowding out in the short run. 
C)  is never effective because of crowding out. 
D)  can be effective in the long run.

Question 9

Figure 18-8
  
-Refer to Figure 18-8.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

Accepted Answer

A)  increase government purchases 
B)  decrease government purchases 
C)  increase income taxes 
D)  sell Treasury bills 
A)  increase government purchases 
B)  decrease government purchases 
C)  increase income taxes 
D)  sell Treasury bills

Question 10

Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?

Accepted Answer

The tax rate affects how much of the add

Question 11

Compare the effect on the price level and real GDP of a decrease in tax rates assuming a supply-side effect versus no supply-side effect.Compared to no supply-side effect,including a supply-side effect for the decrease in tax rates will cause the price level to increase ________ and real GDP to increase ________.

Accepted Answer

A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more 
A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more

Question 12

The largest and fastest-growing category of federal government expenditures is

Accepted Answer

A)  grants to state and local governments. 
B)  interest on the national debt. 
C)  national park spending. 
D)  transfer payments. 
A)  grants to state and local governments. 
B)  interest on the national debt. 
C)  national park spending. 
D)  transfer payments.

A cut in tax rates effects equilibrium real GDP through two channels: disposable income and consumer spending,and the size of the multiplier effect.

A government tax rebate of $1,000 would your disposable income by .

The federal government debt as a percentage of GDP did not rise

The total value of U.S.Treasury bonds outstanding is called the federal government debt.

Figure 18-5 -Refer to Figure 18-5.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,Congress and the president would most likely pursue

During 1970-1997,the U.S.federal government was

Expansionary fiscal policy

Figure 18-8 -Refer to Figure 18-8.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?

Compare the effect on the price level and real GDP of a decrease in tax rates assuming a supply-side effect versus no supply-side effect.Compared to no supply-side effect,including a supply-side effect for the decrease in tax rates will cause the price level to increase and real GDP to increase .

The largest and fastest-growing category of federal government expenditures is

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

A cut in tax rates effects equilibrium real GDP through two channels: ________ disposable income and consumer spending,and ________ the size of the multiplier effect.

A government tax rebate of $1,000 would ________ your disposable income by ________.

The federal government debt as a percentage of GDP did not rise

The total value of U.S.Treasury bonds outstanding is called the federal government debt.

Figure 18-5 -Refer to Figure 18-5.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,Congress and the president would most likely pursue

During 1970-1997,the U.S.federal government was

Expansionary fiscal policy

Figure 18-8 -Refer to Figure 18-8.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?

The largest and fastest-growing category of federal government expenditures is

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

A cut in tax rates effects equilibrium real GDP through two channels: disposable income and consumer spending,and the size of the multiplier effect.

A government tax rebate of $1,000 would your disposable income by .