Question 1

In 2017,the Congressional Budget Office forecast that which of the following would have the lowest average annual growth rate for the years 2017-2027?

Accepted Answer

A) population 
B) hours worked 
C) labor productivity 
D) real GDP 
A) population 
B) hours worked 
C) labor productivity 
D) real GDP

Question 2

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 3

Which of the following is an example of discretionary fiscal policy?

Accepted Answer

A) an increase in unemployment insurance payments during a recession 
B) an increase in income tax receipts with rising income during an expansion 
C) the tax cuts passed by Congress in 2001 to combat the recession 
D) a decrease in food stamps issued during an expansion or boom 
A) an increase in unemployment insurance payments during a recession 
B) an increase in income tax receipts with rising income during an expansion 
C) the tax cuts passed by Congress in 2001 to combat the recession 
D) a decrease in food stamps issued during an expansion or boom

Question 4

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Accepted Answer

A) True 
 B)False

Question 7

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Accepted Answer

A) True 
 B)False

Question 10

The Congressional Budget Office estimates the size of the tax multiplier to be ________ for a 1-year tax cut for higher-income people.

Accepted Answer

A) 0.1 - 0.6 
B) 0.3 - 1.5 
C) 0.5 - 2.5 
D) 2.0 - 3.0 
A) 0.1 - 0.6 
B) 0.3 - 1.5 
C) 0.5 - 2.5 
D) 2.0 - 3.0

Question 11

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Accepted Answer

First,changes in government purchases af

Question 12

A decrease in individual income taxes ________ disposable income,which ________ consumption spending.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases

Question 13

When the Social Security program was in its infancy in 1940,the ratio of workers to retirees was more than 150 to 1.Currently,the ratio of workers to retirees is

Accepted Answer

A) more than 300 to 1. 
B) 50 to 1. 
C) less than 3 to 1. 
D) an even 1 to 1. 
A) more than 300 to 1. 
B) 50 to 1. 
C) less than 3 to 1. 
D) an even 1 to 1.

Question 14

Which of the following would increase the size of the government purchases multiplier?

Accepted Answer

A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income 
A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income

Question 15

To combat inflation,Congress and the president should

Accepted Answer

A) decrease government spending. 
B) decrease taxes. 
C) raise interest rates. 
D) increase transfer payments. 
A) decrease government spending. 
B) decrease taxes. 
C) raise interest rates. 
D) increase transfer payments.

Question 16

Suppose the federal budget deficit for the year was $100 billion and the economy was in a recession.If the economy had been at potential GDP,it is estimated that tax revenues would have been $60 billion higher and government spending on transfer payments $50 billion lower.Using these estimates,the cyclically adjusted budget

Accepted Answer

A) deficit was $210 billion. 
B) deficit was $110 billion. 
C) surplus was $10 billion. 
D) surplus was $110 billion. 
A) deficit was $210 billion. 
B) deficit was $110 billion. 
C) surplus was $10 billion. 
D) surplus was $110 billion.

Question 17

A decrease in which of the following would decrease the tax wedge?

Accepted Answer

A) marginal tax rate 
B) money supply 
C) national debt 
D) federal budget deficit 
A) marginal tax rate 
B) money supply 
C) national debt 
D) federal budget deficit

Question 18

Suppose the president is successful in passing a $10 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.8.What happens to equilibrium GDP?

Accepted Answer

A) There is a $50 billion increase in equilibrium GDP. 
B) There is a $50 billion decrease in equilibrium GDP. 
C) There is a $40 billion increase in equilibrium GDP. 
D) There is a $40 billion decrease in equilibrium GDP. 
A) There is a $50 billion increase in equilibrium GDP. 
B) There is a $50 billion decrease in equilibrium GDP. 
C) There is a $40 billion increase in equilibrium GDP. 
D) There is a $40 billion decrease in equilibrium GDP.

Question 19

Government transfer payments include which of the following?

Accepted Answer

A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense 
A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense

Question 20

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

Accepted Answer

A) reduce investment in new capital. 
B) make domestic businesses less competitive in international markets as the dollar appreciates in value. 
C) raise interest rates and reduce consumer expenditures on automobiles and new houses. 
D) All of the above are correct. 
A) reduce investment in new capital. 
B) make domestic businesses less competitive in international markets as the dollar appreciates in value. 
C) raise interest rates and reduce consumer expenditures on automobiles and new houses. 
D) All of the above are correct.

In 2017,the Congressional Budget Office forecast that which of the following would have the lowest average annual growth rate for the years 2017-2027?

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 .

Which of the following is an example of discretionary fiscal policy?

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

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

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

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.)

The government purchases multiplier will be larger if the marginal income tax rate decreases.

The Congressional Budget Office estimates the size of the tax multiplier to be ________ for a 1-year tax cut for higher-income people.

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

A decrease in individual income taxes disposable income,which consumption spending.

When the Social Security program was in its infancy in 1940,the ratio of workers to retirees was more than 150 to 1.Currently,the ratio of workers to retirees is

Which of the following would increase the size of the government purchases multiplier?

To combat inflation,Congress and the president should

A decrease in which of the following would decrease the tax wedge?

Suppose the president is successful in passing a $10 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.8.What happens to equilibrium GDP?

Government transfer payments include which of the following?

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 16: Fiscal Policy

In 2017,the Congressional Budget Office forecast that which of the following would have the lowest average annual growth rate for the years 2017-2027?

Which of the following is an example of discretionary fiscal policy?

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

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

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

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.)

The government purchases multiplier will be larger if the marginal income tax rate decreases.

The Congressional Budget Office estimates the size of the tax multiplier to be ________ for a 1-year tax cut for higher-income people.

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

A decrease in individual income taxes ________ disposable income,which ________ consumption spending.

When the Social Security program was in its infancy in 1940,the ratio of workers to retirees was more than 150 to 1.Currently,the ratio of workers to retirees is

Which of the following would increase the size of the government purchases multiplier?

To combat inflation,Congress and the president should

A decrease in which of the following would decrease the tax wedge?

Suppose the president is successful in passing a $10 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.8.What happens to equilibrium GDP?

Government transfer payments include which of the following?

An increase in government spending may expedite recovery from a recession in the short run,but in the long run this policy may

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

A decrease in individual income taxes disposable income,which consumption spending.