Question 1

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

Accepted Answer

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

Question 2

It can be ________ difficult to effectively time fiscal policy than monetary policy because ________.

Accepted Answer

A)  more; fiscal policy can be quickly decided and changed 
B)  more; fiscal policy takes longer to implement 
C)  less; monetary policy takes longer to decide and change 
D)  less; monetary policy takes longer to implement 
A)  more; fiscal policy can be quickly decided and changed 
B)  more; fiscal policy takes longer to implement 
C)  less; monetary policy takes longer to decide and change 
D)  less; monetary policy takes longer to implement

Question 3

In Australia in 2005/06,the federal government had zero net debt for the first time in over ________.

Accepted Answer

A)  5 years 
B)  15 years 
C)  20 years 
D)  30 years 
A)  5 years 
B)  15 years 
C)  20 years 
D)  30 years

Question 4

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.

Accepted Answer

A)  automatic stabilisers; discretionary fiscal policy 
B)  discretionary fiscal policy; automatic stabilisers 
C)  automatic stabilisers; monetary policy 
D)  discretionary fiscal policy; conscious fiscal policy 
A)  automatic stabilisers; discretionary fiscal policy 
B)  discretionary fiscal policy; automatic stabilisers 
C)  automatic stabilisers; monetary policy 
D)  discretionary fiscal policy; conscious fiscal policy

Question 5

If the equilibrium real GDP were higher than potential GDP,then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 6

During economic contractions,government expenditure automatically __________.

Accepted Answer

A)  falls because of programs such as unemployment benefits 
B)  rises because of programs such as unemployment benefits 
C)  falls because of the progressive income tax system 
D)  rises because of the progressive income tax system 
A)  falls because of programs such as unemployment benefits 
B)  rises because of programs such as unemployment benefits 
C)  falls because of the progressive income tax system 
D)  rises because of the progressive income tax system

Question 7

Long lags associated with the legislative process in implementing fiscal policy can make it more difficult to use than monetary policy.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following does not function as an automatic stabiliser?

Accepted Answer

A)  Unemployment benefit payments 
B)  Government expenditure on road building programs 
C)  The Goods and Services Tax (GST) 
D)  The personal income tax system 
A)  Unemployment benefit payments 
B)  Government expenditure on road building programs 
C)  The Goods and Services Tax (GST) 
D)  The personal income tax system

Question 10

If real equilibrium GDP is below the long-run aggregate supply curve,an appropriate fiscal policy would be to _________.

Accepted Answer

A)  increase government purchases and increase a budget deficit 
B)  pursue a contractionary fiscal policy by increasing the budget surplus 
C)  increase individual income taxes to balance the budget 
D)  increase business income taxes to increase tax fairness 
A)  increase government purchases and increase a budget deficit 
B)  pursue a contractionary fiscal policy by increasing the budget surplus 
C)  increase individual income taxes to balance the budget 
D)  increase business income taxes to increase tax fairness

Question 11

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

Accepted Answer

A)  An increase in the number unemployment benefit payments during a recession due to rising unemployment 
B)  An increase in income tax receipts during an expansion because incomes are rising 
C)  Tax increases to combat rising inflation 
D)  A decrease in income tax receipts during a recession because incomes are falling 
A)  An increase in the number unemployment benefit payments during a recession due to rising unemployment 
B)  An increase in income tax receipts during an expansion because incomes are rising 
C)  Tax increases to combat rising inflation 
D)  A decrease in income tax receipts during a recession because incomes are falling

Question 12

What is the difference between 'federal purchases' and 'federal expenditures'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Federal purchases refer to federal spend

Question 13

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 14

Increases in government spending result in ________ in the short run,and permanent increases in government spending result in ________ in the long run.

Accepted Answer

A)  partial crowding out; partial crowding out 
B)  partial crowding out; complete crowding out 
C)  complete crowding out; complete crowding out 
D)  complete crowding out; partial crowding out 
A)  partial crowding out; partial crowding out 
B)  partial crowding out; complete crowding out 
C)  complete crowding out; complete crowding out 
D)  complete crowding out; partial crowding out

Question 15

Suppose real GDP is $13 trillion,potential GDP is $13.5 trillion,and the government plans to use fiscal policy to restore the economy to potential GDP.Assuming a constant price level,the government would need to increase government purchases by _________.

Accepted Answer

A)  $500 billion 
B)  less than $500 billion 
C)  more than $500 billion 
D)  None of these options is correct. The government must act to decrease government purchases in this case. 
A)  $500 billion 
B)  less than $500 billion 
C)  more than $500 billion 
D)  None of these options is correct. The government must act to decrease government purchases in this case.

Question 16

Show the effects of tax reduction and simplification using the dynamic aggregate demand and supply model.To simplify the analysis,assume that the aggregate demand curve does not change.How does the analysis change if the tax change does not change labour supply and has little or no effect on savings and investment?   _____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The economy's initial equilibrium is at

Question 17

The government 'purchases multiplier' always has a positive sign and the 'tax multiplier' always has a negative sign.

Accepted Answer

A) True 
 B)False

Question 18

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.

Accepted Answer

A)  8 per cent and 12 per cent 
B)  15 per cent and 20 per cent 
C)  22 per cent and 28 per cent 
D)  40 per cent and 45 per cent 
A)  8 per cent and 12 per cent 
B)  15 per cent and 20 per cent 
C)  22 per cent and 28 per cent 
D)  40 per cent and 45 per cent

Question 19

If a(n)________________ in government purchases leads to a(n)____________ in interest rates,the effect is called crowding out.

Accepted Answer

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

Question 20

Which of the following would be considered a fiscal policy action?

Accepted Answer

A)  A city changes its rates of land tax. 
B)  A federal government creates a subsidy for hybrid cars to encourage the purchase of fuel-efficient cars. 
C)  Foreign aid is given to Indonesia. 
D)  A tax cut is designed to stimulate spending during an economic contraction. 
A)  A city changes its rates of land tax. 
B)  A federal government creates a subsidy for hybrid cars to encourage the purchase of fuel-efficient cars. 
C)  Foreign aid is given to Indonesia. 
D)  A tax cut is designed to stimulate spending during an economic contraction.

Expansionary fiscal policy the price level and equilibrium real GDP.

It can be difficult to effectively time fiscal policy than monetary policy because .

In Australia in 2005/06,the federal government had zero net debt for the first time in over ________.

Active changes in tax and spending by government intended to smooth out the business cycle are called ,and changes in taxes and spending that occur passively over the business cycle are called .

If the equilibrium real GDP were higher than potential GDP,then a contractionary fiscal policy would cause the inflation rate to be and real GDP to be .

During economic contractions,government expenditure automatically __________.

Long lags associated with the legislative process in implementing fiscal policy can make it more difficult to use than monetary policy.

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

Which of the following does not function as an automatic stabiliser?

If real equilibrium GDP is below the long-run aggregate supply curve,an appropriate fiscal policy would be to _________.

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

What is the difference between 'federal purchases' and 'federal expenditures'? _ _

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

Increases in government spending result in in the short run,and permanent increases in government spending result in in the long run.

Suppose real GDP is $13 trillion,potential GDP is $13.5 trillion,and the government plans to use fiscal policy to restore the economy to potential GDP.Assuming a constant price level,the government would need to increase government purchases by _________.

The government 'purchases multiplier' always has a positive sign and the 'tax multiplier' always has a negative sign.

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.

If a(n)____ in government purchases leads to a(n) in interest rates,the effect is called crowding out.

Which of the following would be considered a fiscal policy action?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 18: Fiscal Policy

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

It can be ________ difficult to effectively time fiscal policy than monetary policy because ________.

In Australia in 2005/06,the federal government had zero net debt for the first time in over ________.

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.

If the equilibrium real GDP were higher than potential GDP,then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be ________.

During economic contractions,government expenditure automatically __________.

Long lags associated with the legislative process in implementing fiscal policy can make it more difficult to use than monetary policy.

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

Which of the following does not function as an automatic stabiliser?

If real equilibrium GDP is below the long-run aggregate supply curve,an appropriate fiscal policy would be to _________.

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

What is the difference between 'federal purchases' and 'federal expenditures'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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

Increases in government spending result in ________ in the short run,and permanent increases in government spending result in ________ in the long run.

Suppose real GDP is $13 trillion,potential GDP is $13.5 trillion,and the government plans to use fiscal policy to restore the economy to potential GDP.Assuming a constant price level,the government would need to increase government purchases by _________.

The government 'purchases multiplier' always has a positive sign and the 'tax multiplier' always has a negative sign.

Federal government expenditure as a proportion of GDP in Australia between 1980 and 2010 has varied between _________.

If a(n)________________ in government purchases leads to a(n)____________ in interest rates,the effect is called crowding out.

Which of the following would be considered a fiscal policy action?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Expansionary fiscal policy the price level and equilibrium real GDP.

It can be difficult to effectively time fiscal policy than monetary policy because .

Active changes in tax and spending by government intended to smooth out the business cycle are called ,and changes in taxes and spending that occur passively over the business cycle are called .

If the equilibrium real GDP were higher than potential GDP,then a contractionary fiscal policy would cause the inflation rate to be and real GDP to be .

What is the difference between 'federal purchases' and 'federal expenditures'? _ _

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

Increases in government spending result in in the short run,and permanent increases in government spending result in in the long run.

If a(n)____ in government purchases leads to a(n) in interest rates,the effect is called crowding out.