Question 1

Assume an MPC of 0.6.The change in total spending for the economy as a result of a $10 billion new government spending injection would be:

Accepted Answer

A)  $6 billion. 
B)  $25 billion. 
C)  $60 billion. 
D)  $600 billion. 
A)  $6 billion. 
B)  $25 billion. 
C)  $60 billion. 
D)  $600 billion.

Question 2

The marginal propensity to save is equal to:

Accepted Answer

A)  1 - MPC. 
B)  1 - multiplier. 
C)  1 ÷ MPC. 
D)  (Total savings)÷ (total disposable income). 
A)  1 - MPC. 
B)  1 - multiplier. 
C)  1 ÷ MPC. 
D)  (Total savings)÷ (total disposable income).

Question 3

Explain how macro equilibrium and full employment are determined in different ways.

Accepted Answer

Macro equilibrium occurs where aggregate

Question 4

If consumers save 21 cents out of every dollar received,the:

Accepted Answer

A)  MPS is 0.79. 
B)  MPC is 0.21. 
C)  Multiplier is 0.21. 
D)  MPS is 0.21. 
A)  MPS is 0.79. 
B)  MPC is 0.21. 
C)  Multiplier is 0.21. 
D)  MPS is 0.21.

Question 5

Which of the following is an example of fiscal stimulus?

Accepted Answer

A)  An increase in government spending on new military jet fighters 
B)  An increase in consumption because of improved consumer confidence 
C)  An increase in personal income taxes for families with children 
D)  An increase in the purchase of office buildings by foreign investors 
A)  An increase in government spending on new military jet fighters 
B)  An increase in consumption because of improved consumer confidence 
C)  An increase in personal income taxes for families with children 
D)  An increase in the purchase of office buildings by foreign investors

Question 6

Which of the following provides fiscal stimulus to the economy?

Accepted Answer

A)  Higher interest rates 
B)  Increased imports 
C)  More efficient employment of resources 
D)  Increased government purchases 
A)  Higher interest rates 
B)  Increased imports 
C)  More efficient employment of resources 
D)  Increased government purchases

Question 7

Assume an MPC of 0.75.The change in total spending for the economy as a result of a $20 billion new government spending injection would be:

Accepted Answer

A)  $80 billion. 
B)  $27 billion. 
C)  $22 billion. 
D)  $15 billion. 
A)  $80 billion. 
B)  $27 billion. 
C)  $22 billion. 
D)  $15 billion.

Question 8

If consumers spend 79 cents out of every extra dollar received,the:

Accepted Answer

A)  Multiplier is 0.79. 
B)  MPC is 0.79. 
C)  MPS is 0.79. 
D)  MPC is 0.21 
A)  Multiplier is 0.79. 
B)  MPC is 0.79. 
C)  MPS is 0.79. 
D)  MPC is 0.21

Question 9

According to Keynes,which of the following is possible at the intersection of aggregate supply and aggregate demand?

Accepted Answer

A)  Full employment or high levels of unemployment,but not inflation 
B)  Inflation,full employment,or high levels of unemployment 
C)  Inflation and high levels of unemployment,but not full employment 
D)  Full employment,but not high levels of unemployment or inflation 
A)  Full employment or high levels of unemployment,but not inflation 
B)  Inflation,full employment,or high levels of unemployment 
C)  Inflation and high levels of unemployment,but not full employment 
D)  Full employment,but not high levels of unemployment or inflation

Question 10

Which of the following relies on government taxes and spending to change macro outcomes?

Accepted Answer

A)  Fiscal policy 
B)  Monetary policy 
C)  Income policy 
D)  Foreign-trade policy 
A)  Fiscal policy 
B)  Monetary policy 
C)  Income policy 
D)  Foreign-trade policy

Question 11

If consumers spend 80 cents out of every extra dollar received,the:

Accepted Answer

A)  MPS is 0.80. 
B)  MPC is 0.20. 
C)  Multiplier is 20. 
D)  Multiplier is 5. 
A)  MPS is 0.80. 
B)  MPC is 0.20. 
C)  Multiplier is 20. 
D)  Multiplier is 5.

Question 12

Ceteris paribus,based on the circular flow model,a spending injection results in:

Accepted Answer

A)  A decrease in total income for consumers. 
B)  An increase in total income for consumers. 
C)  An increase in the MPS. 
D)  A decrease in the MPS. 
A)  A decrease in total income for consumers. 
B)  An increase in total income for consumers. 
C)  An increase in the MPS. 
D)  A decrease in the MPS.

Question 13

What fiscal policy tools are used to shift the aggregate demand curve?

Accepted Answer

A)  Government spending and interest rates 
B)  Taxes and interest rates 
C)  Government spending and taxes 
D)  Taxes and employment rates 
A)  Government spending and interest rates 
B)  Taxes and interest rates 
C)  Government spending and taxes 
D)  Taxes and employment rates

Question 14

The aggregate demand curve shifts to the left when:

Accepted Answer

A)  Government purchases are decreased. 
B)  Government purchases are increased. 
C)  Taxes are decreased. 
D)  Government transfers are increaseD. 
A)  Government purchases are decreased. 
B)  Government purchases are increased. 
C)  Taxes are decreased. 
D)  Government transfers are increaseD.

Question 15

Fiscal policy is unnecessary since aggregate demand is always compatible with economic stability.

Accepted Answer

A) True 
 B)False

Question 16

If government spending increases,which causes producers to hire more workers,and as a result households have more income to spend,which causes aggregate demand to increase even more,this is known as the:

Accepted Answer

A)  Magnifying process. 
B)  Multiplier process. 
C)  Saving effect. 
D)  Fiscal effect. 
A)  Magnifying process. 
B)  Multiplier process. 
C)  Saving effect. 
D)  Fiscal effect.

Question 17

One News Wire article in the text says,"After years of living happily beyond their means,Americans are finally facing financial reality." Ceteris paribus,a decrease in consumer spending will result in:

Accepted Answer

A)  An increase in the MPS. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  An increase in taxes. 
A)  An increase in the MPS. 
B)  A rightward shift of the aggregate supply curve. 
C)  A leftward shift of the aggregate demand curve. 
D)  An increase in taxes.

Question 18

The best government policy during a period of inflation,ceteris paribus,is to balance the federal budget.

Accepted Answer

A) True 
 B)False

Question 19

The four components of aggregate demand are consumption,investment,government expenditures,and net exports.

Accepted Answer

A) True 
 B)False

Question 20

Figure 12.2:   
-Using Figure 12.2,which fiscal policy action would increase aggregate demand from AD1 to AD2 ceteris paribus?

Accepted Answer

A)  A decrease in transfer payments 
B)  A decrease in taxes 
C)  A decrease in government spending 
D)  An increase in saving 
A)  A decrease in transfer payments 
B)  A decrease in taxes 
C)  A decrease in government spending 
D)  An increase in saving

Assume an MPC of 0.6.The change in total spending for the economy as a result of a $10 billion new government spending injection would be:

The marginal propensity to save is equal to:

Explain how macro equilibrium and full employment are determined in different ways.

If consumers save 21 cents out of every dollar received,the:

Which of the following is an example of fiscal stimulus?

Which of the following provides fiscal stimulus to the economy?

Assume an MPC of 0.75.The change in total spending for the economy as a result of a $20 billion new government spending injection would be:

If consumers spend 79 cents out of every extra dollar received,the:

According to Keynes,which of the following is possible at the intersection of aggregate supply and aggregate demand?

Which of the following relies on government taxes and spending to change macro outcomes?

If consumers spend 80 cents out of every extra dollar received,the:

Ceteris paribus,based on the circular flow model,a spending injection results in:

What fiscal policy tools are used to shift the aggregate demand curve?

The aggregate demand curve shifts to the left when:

Fiscal policy is unnecessary since aggregate demand is always compatible with economic stability.

If government spending increases,which causes producers to hire more workers,and as a result households have more income to spend,which causes aggregate demand to increase even more,this is known as the:

One News Wire article in the text says,"After years of living happily beyond their means,Americans are finally facing financial reality." Ceteris paribus,a decrease in consumer spending will result in:

The best government policy during a period of inflation,ceteris paribus,is to balance the federal budget.

The four components of aggregate demand are consumption,investment,government expenditures,and net exports.

Figure 12.2: -Using Figure 12.2,which fiscal policy action would increase aggregate demand from AD₁ to AD₂ ceteris paribus?

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 12: Fiscal Policy

Assume an MPC of 0.6.The change in total spending for the economy as a result of a $10 billion new government spending injection would be:

The marginal propensity to save is equal to:

Explain how macro equilibrium and full employment are determined in different ways.

If consumers save 21 cents out of every dollar received,the:

Which of the following is an example of fiscal stimulus?

Which of the following provides fiscal stimulus to the economy?

Assume an MPC of 0.75.The change in total spending for the economy as a result of a $20 billion new government spending injection would be:

If consumers spend 79 cents out of every extra dollar received,the:

According to Keynes,which of the following is possible at the intersection of aggregate supply and aggregate demand?

Which of the following relies on government taxes and spending to change macro outcomes?

If consumers spend 80 cents out of every extra dollar received,the:

Ceteris paribus,based on the circular flow model,a spending injection results in:

What fiscal policy tools are used to shift the aggregate demand curve?

The aggregate demand curve shifts to the left when:

Fiscal policy is unnecessary since aggregate demand is always compatible with economic stability.

If government spending increases,which causes producers to hire more workers,and as a result households have more income to spend,which causes aggregate demand to increase even more,this is known as the:

One News Wire article in the text says,"After years of living happily beyond their means,Americans are finally facing financial reality." Ceteris paribus,a decrease in consumer spending will result in:

The best government policy during a period of inflation,ceteris paribus,is to balance the federal budget.

The four components of aggregate demand are consumption,investment,government expenditures,and net exports.

Figure 12.2: -Using Figure 12.2,which fiscal policy action would increase aggregate demand from AD1 to AD2 ceteris paribus?

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Figure 12.2: -Using Figure 12.2,which fiscal policy action would increase aggregate demand from AD₁ to AD₂ ceteris paribus?