Question 1

If the aggregate supply curve is vertical,it follows that a change in

Accepted Answer

A)  Real GDP can originate on the demand side of the economy. 
B)  Real GDP can originate on the supply side of the economy. 
C)  Real GDP can originate on either the demand side or the supply side of the economy. 
D)  price level can originate on the demand side of the economy. 
E)  b and d 
A)  Real GDP can originate on the demand side of the economy. 
B)  Real GDP can originate on the supply side of the economy. 
C)  Real GDP can originate on either the demand side or the supply side of the economy. 
D)  price level can originate on the demand side of the economy. 
E)  b and d

Question 2

If tax rates are cut,tax revenues may rise,fall,or remain unchanged.What actually happens is considered a(n)

Accepted Answer

A)  theoretical issue. 
B)  corrective issue. 
C)  empirical issue. 
D)  self-regulating issue. 
E)  multiplier issue. 
A)  theoretical issue. 
B)  corrective issue. 
C)  empirical issue. 
D)  self-regulating issue. 
E)  multiplier issue.

Question 3

If the (average)tax rate falls by 10% and as a result the tax base rises by 20%,then tax revenues will

Accepted Answer

A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  There is not enough information given to answer this question. 
A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  There is not enough information given to answer this question.

Question 4

Suppose that a $4 billion increase in government spending increases Real GDP by $60 billion,and that a $3 billion tax reduction increases Real GDP by $68 billion.In this situation,the tax multiplier is _______________ the government spending multiplier.

Accepted Answer

A)  less than 
B)  greater than 
C)  equal to 
D)  none of the above 
A)  less than 
B)  greater than 
C)  equal to 
D)  none of the above

Question 5

Suppose that the government spending multiplier is 2.7 and the tax multiplier is 3.8.This means that,if prices are constant,a $400 billion rise in government spending will __________________,and a $400 billion cut in taxes will _____________________.

Accepted Answer

A)  raise Real GDP by $1,080 billion; raise Real GDP by $1,520 billion 
B)  lower Real GDP by $1,080 billion; lower Real GDP by $1,520 billion 
C)  raise Real GDP by $148 billion; raise Real GDP by $105 billion 
D)  lower Real GDP by $148 billion; lower Real GDP by $105 billion 
A)  raise Real GDP by $1,080 billion; raise Real GDP by $1,520 billion 
B)  lower Real GDP by $1,080 billion; lower Real GDP by $1,520 billion 
C)  raise Real GDP by $148 billion; raise Real GDP by $105 billion 
D)  lower Real GDP by $148 billion; lower Real GDP by $105 billion

Question 6

The government spending multiplier is the number that,when multiplied by the

Accepted Answer

A)  budget deficit,gives us the change in total spending. 
B)  budget deficit,gives us the change in the public debt. 
C)  change in taxes,gives us the change in total spending. 
D)  change in government spending,gives us the change in total spending. 
A)  budget deficit,gives us the change in total spending. 
B)  budget deficit,gives us the change in the public debt. 
C)  change in taxes,gives us the change in total spending. 
D)  change in government spending,gives us the change in total spending.

Question 7

Economist C says all of the following: Expansionary fiscal policy is needed to raise aggregate demand and remove the economy from a recessionary gap.The choice of fiscal policy measures is between ________________ government spending and a _______________ in taxes.Since I am in favor of bigger government,I choose a(n)_________________ in _________________.

Accepted Answer

A)  less; decrease; increase; government spending 
B)  more; decrease; increase; government spending 
C)  less; rise; decrease; government spending 
D)  less; reduction; increase; taxes 
E)  b or d 
A)  less; decrease; increase; government spending 
B)  more; decrease; increase; government spending 
C)  less; rise; decrease; government spending 
D)  less; reduction; increase; taxes 
E)  b or d

Question 8

A theory must be capable of being proved wrong if,in fact,it is wrong.

Accepted Answer

A) True 
 B)False

Question 9

Economists who believe in complete crowding out would argue that

Accepted Answer

A)  jobs created or saved because of increased government spending will be matched by an equal number of jobs created by an increase in private sector spending. 
B)  jobs created or saved because of increased government spending will be completely offset by jobs destroyed by a decline in private sector spending. 
C)  government policies intended to stimulate aggregate demand will be completely ineffective. 
D)  government policies intended to stimulate aggregate demand will tend to be effective. 
E)  a and c 
A)  jobs created or saved because of increased government spending will be matched by an equal number of jobs created by an increase in private sector spending. 
B)  jobs created or saved because of increased government spending will be completely offset by jobs destroyed by a decline in private sector spending. 
C)  government policies intended to stimulate aggregate demand will be completely ineffective. 
D)  government policies intended to stimulate aggregate demand will tend to be effective. 
E)  a and c

Question 10

Those economists who argue that a significant amount of crowding out exists believe that the impact of expansionary fiscal policy will be _________________ by the crowding out.Their reasoning is that if the government increases purchases,and finances that spending by borrowing money,spending in the private sector will _______________,leading ultimately to _____________ in aggregate demand.

Accepted Answer

A)  strengthened; fall; little or no change 
B)  strengthened; rise; a significant rise 
C)  weakened; fall; little or no change 
D)  weakened; rise; a significant rise 
A)  strengthened; fall; little or no change 
B)  strengthened; rise; a significant rise 
C)  weakened; fall; little or no change 
D)  weakened; rise; a significant rise

Question 11

Economist A believes that the expansionary fiscal policy --- in the form of increased government spending --- should be implemented to remove the economy from the recessionary gap it is currently in.This economist probably believes that

Accepted Answer

A)  crowding out will not present much of a problem. 
B)  crowding out will be a big problem. 
C)  crowding out is irrelevant to the degree of effectiveness of fiscal policy. 
D)  zero crowding out is unlikely. 
E)  c and d 
A)  crowding out will not present much of a problem. 
B)  crowding out will be a big problem. 
C)  crowding out is irrelevant to the degree of effectiveness of fiscal policy. 
D)  zero crowding out is unlikely. 
E)  c and d

Question 12

Economists who view the AS curve as upward sloping believe that Real GDP can only rise as a result of a rightward shift of the AS curve.

Accepted Answer

A) True 
 B)False

Question 13

Tax revenues can rise as a result of a decrease in income tax rates,as long as the tax base increases sufficiently.

Accepted Answer

A) True 
 B)False

Question 14

Economists who view the AS curve as vertical believe that government cannot do anything to raise Real GDP from the demand side of the economy.

Accepted Answer

A) True 
 B)False

Question 15

Economist A believes that if tax rates are cut,tax revenue is likely to rise.This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base.

Accepted Answer

A)  be larger than the resulting 
B)  be equal to the resulting 
C)  be smaller than the resulting 
D)  occur long after the 
E)  a and d 
A)  be larger than the resulting 
B)  be equal to the resulting 
C)  be smaller than the resulting 
D)  occur long after the 
E)  a and d

Question 16

If the AS curve is vertical,then it follows that

Accepted Answer

A)  Real GDP changes will always arise from the supply side of the economy. 
B)  Real GDP changes will always arise from the demand side of the economy. 
C)  Price level changes will always arise from the demand side of the economy. 
D)  Price level changes will always arise from the supply side of the economy. 
E)  a and c 
A)  Real GDP changes will always arise from the supply side of the economy. 
B)  Real GDP changes will always arise from the demand side of the economy. 
C)  Price level changes will always arise from the demand side of the economy. 
D)  Price level changes will always arise from the supply side of the economy. 
E)  a and c

Question 17

"We lose more by letting the company fail than by having the government save it." This was most likely said by an economist who believes that

Accepted Answer

A)  crowding out is complete. 
B)  bailouts are sometimes necessary. 
C)  the tax multiplier is larger than the government spending multiplier. 
D)  the AS curve is vertical. 
E)  the AS curve is upward-sloping. 
A)  crowding out is complete. 
B)  bailouts are sometimes necessary. 
C)  the tax multiplier is larger than the government spending multiplier. 
D)  the AS curve is vertical. 
E)  the AS curve is upward-sloping.

Question 18

If income tax rates are cut,the size of the budget deficit will necessarily increase.

Accepted Answer

A) True 
 B)False

Question 19

If the (average)tax rate falls by 20% and as a result the tax base rises by 20%,tax revenues will

Accepted Answer

A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  There is not enough information given to answer this question. 
A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  There is not enough information given to answer this question.

Question 20

Which of the following is false?

Accepted Answer

A)  Economists who believe that the AS curve is vertical assert that changes in Real GDP originate only on the supply side of the economy. 
B)  Economists who believe that the AS curve is upward-sloping assert that changes in Real GDP originate only on the supply side of the economy. 
C)  For economists who believe that the AS curve is upward-sloping,government policy that aims to impact either side of the economy (supply or demand)will change both prices and Real GDP. 
D)  Compared to the economists who believe that the AS curve is upward-sloping,the economists who believe that the AS curve is upward-sloping assert that the government has fewer tools with which to change Real GDP. 
A)  Economists who believe that the AS curve is vertical assert that changes in Real GDP originate only on the supply side of the economy. 
B)  Economists who believe that the AS curve is upward-sloping assert that changes in Real GDP originate only on the supply side of the economy. 
C)  For economists who believe that the AS curve is upward-sloping,government policy that aims to impact either side of the economy (supply or demand)will change both prices and Real GDP. 
D)  Compared to the economists who believe that the AS curve is upward-sloping,the economists who believe that the AS curve is upward-sloping assert that the government has fewer tools with which to change Real GDP.

Exam 18: Public Choice and Special-Interest-Group Politics

If the aggregate supply curve is vertical,it follows that a change in

If tax rates are cut,tax revenues may rise,fall,or remain unchanged.What actually happens is considered a(n)

If the (average)tax rate falls by 10% and as a result the tax base rises by 20%,then tax revenues will

Suppose that a $4 billion increase in government spending increases Real GDP by $60 billion,and that a $3 billion tax reduction increases Real GDP by $68 billion.In this situation,the tax multiplier is _______________ the government spending multiplier.

Suppose that the government spending multiplier is 2.7 and the tax multiplier is 3.8.This means that,if prices are constant,a $400 billion rise in government spending will __________________,and a $400 billion cut in taxes will _____________________.

The government spending multiplier is the number that,when multiplied by the

A theory must be capable of being proved wrong if,in fact,it is wrong.

Economists who believe in complete crowding out would argue that

Economist A believes that the expansionary fiscal policy --- in the form of increased government spending --- should be implemented to remove the economy from the recessionary gap it is currently in.This economist probably believes that

Economists who view the AS curve as upward sloping believe that Real GDP can only rise as a result of a rightward shift of the AS curve.

Tax revenues can rise as a result of a decrease in income tax rates,as long as the tax base increases sufficiently.

Economists who view the AS curve as vertical believe that government cannot do anything to raise Real GDP from the demand side of the economy.

Economist A believes that if tax rates are cut,tax revenue is likely to rise.This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base.

If the AS curve is vertical,then it follows that

"We lose more by letting the company fail than by having the government save it." This was most likely said by an economist who believes that

If income tax rates are cut,the size of the budget deficit will necessarily increase.

If the (average)tax rate falls by 20% and as a result the tax base rises by 20%,tax revenues will

Which of the following is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

Suppose that the government spending multiplier is 2.7 and the tax multiplier is 3.8.This means that,if prices are constant,a $400 billion rise in government spending will ,and a $400 billion cut in taxes will ___.