Question 1

Fiscal policy refers to

Accepted Answer

A) efforts to balance a government's budget. 
B) changes in the money supply to achieve particular economic goals. 
C) changes in government expenditures and taxation to achieve particular economic goals. 
D) the change in private expenditures that occurs as a consequence of changes in government spending. 
A) efforts to balance a government's budget. 
B) changes in the money supply to achieve particular economic goals. 
C) changes in government expenditures and taxation to achieve particular economic goals. 
D) the change in private expenditures that occurs as a consequence of changes in government spending.

Question 2

In June 2012,the public debt in the United States was approximately

Accepted Answer

A) $5.8 billion. 
B) $90 billion. 
C) $1.6 billion. 
D) $15.8 trillion. 
E) $120 trillion. 
A) $5.8 billion. 
B) $90 billion. 
C) $1.6 billion. 
D) $15.8 trillion. 
E) $120 trillion.

Question 3

Which of the following is an example of crowding out?

Accepted Answer

A) A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. 
B) A budget deficit causes an increase in interest rates,which causes a decrease in investment spending. 
C) An increase in tariffs which causes a decrease in imports. 
D) A decrease in government housing subsidies which causes an increase in private spending on housing. 
A) A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. 
B) A budget deficit causes an increase in interest rates,which causes a decrease in investment spending. 
C) An increase in tariffs which causes a decrease in imports. 
D) A decrease in government housing subsidies which causes an increase in private spending on housing.

Question 4

All other things held constant,lower marginal (income)tax rates

Accepted Answer

A) necessarily increase tax revenues. 
B) necessarily decrease tax revenues. 
C) decrease the attractiveness of productive activities relative to leisure and tax- avoidance activities,and shift the SRAS curve rightward. 
D) do not affect the attractiveness of productive activities relative to leisure and tax- avoidance activities and therefore the SRAS does not shift rightward or leftward. 
E) increase the attractiveness of productive activities relative to leisure and tax- avoidance activities and shift the SRAS curve rightward. 
A) necessarily increase tax revenues. 
B) necessarily decrease tax revenues. 
C) decrease the attractiveness of productive activities relative to leisure and tax- avoidance activities,and shift the SRAS curve rightward. 
D) do not affect the attractiveness of productive activities relative to leisure and tax- avoidance activities and therefore the SRAS does not shift rightward or leftward. 
E) increase the attractiveness of productive activities relative to leisure and tax- avoidance activities and shift the SRAS curve rightward.

Question 5

The AD curve shifts to the left with a __________ in government purchases (G)or a __________ in taxes.

Accepted Answer

A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall 
A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall

Question 6

Increased government spending and tax cuts characterize

Accepted Answer

A) contractionary fiscal policy. 
B) expansionary fiscal policy. 
C) expansionary monetary policy. 
D) deflationary policy. 
E) none of the above 
A) contractionary fiscal policy. 
B) expansionary fiscal policy. 
C) expansionary monetary policy. 
D) deflationary policy. 
E) none of the above

Question 7

In 2011,the top 50 percent of income earners in the U.S.paid about __________ percent of the total federal income taxes.

Accepted Answer

A) 57.1 
B) 67.1 
C) 77.1 
D) 87.1 
E) 97.1 
A) 57.1 
B) 67.1 
C) 77.1 
D) 87.1 
E) 97.1

Question 8

The U.S.income tax is currently a __________ tax.

Accepted Answer

A) progressive 
B) proportional 
C) regressive 
D) proactive 
A) progressive 
B) proportional 
C) regressive 
D) proactive

Question 9

If there is complete crowding out as a result of an increase in government spending there will be

Accepted Answer

A) a decrease in aggregate demand. 
B) no change in aggregate demand. 
C) an increase in aggregate demand. 
D) a downward movement along the aggregate demand curve. 
A) a decrease in aggregate demand. 
B) no change in aggregate demand. 
C) an increase in aggregate demand. 
D) a downward movement along the aggregate demand curve.

Question 10

The AD curve shifts to the right with a __________ in government purchases (G)or a __________ in taxes.

Accepted Answer

A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall 
A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall

Question 11

When the government decides to increase income taxes,this is an example of contractionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 12

Crowding out results in a decrease in

Accepted Answer

A) transfer payments. 
B) defense spending. 
C) private spending. 
D) government spending. 
A) transfer payments. 
B) defense spending. 
C) private spending. 
D) government spending.

Question 13

Crowding out results when an increase in government spending leads to declines in consumption,investment,and/or net exports.

Accepted Answer

A) True 
 B)False

Question 14

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 42,001st dollar of taxable income earned?

Accepted Answer

A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question. 
A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question.

Question 15

In 2013,federal government spending made up approximately __________ percent of GDP in the United States.

Accepted Answer

A) 14 
B) 23 
C) 34 
D) 44 
E) 54 
A) 14 
B) 23 
C) 34 
D) 44 
E) 54

Question 16

The Laffer curve makes the point that cutting a very high marginal tax rate can __________ the tax base enough so that tax revenues __________.

Accepted Answer

A) lower;rise 
B) lower;fall 
C) raise;rise 
D) raise;fall 
A) lower;rise 
B) lower;fall 
C) raise;rise 
D) raise;fall

Question 17

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base falls from $400 billion to $375 billion.As a result,tax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Accepted Answer

A) rise;upward-sloping 
B) rise;downward-sloping 
C) fall;upward-sloping 
D) fall;downward-sloping 
A) rise;upward-sloping 
B) rise;downward-sloping 
C) fall;upward-sloping 
D) fall;downward-sloping

Question 18

If there is complete crowding out,the change in Real GDP that results from a given change in autonomous spending will be

Accepted Answer

A) zero. 
B) greater than if there was incomplete crowding out. 
C) infinite. 
D) There is not enough information to answer the question. 
A) zero. 
B) greater than if there was incomplete crowding out. 
C) infinite. 
D) There is not enough information to answer the question.

Question 19

An example of expansionary fiscal policy is

Accepted Answer

A) increasing government expenditures. 
B) increasing taxes. 
C) decreasing government expenditures. 
D) decreasing taxes. 
E) a and d 
A) increasing government expenditures. 
B) increasing taxes. 
C) decreasing government expenditures. 
D) decreasing taxes. 
E) a and d

Question 20

When the economy is in a recessionary gap,Keynesian economists will often advocate expansionary policy measures.Why?

Accepted Answer

A) Keynesians believe the economy sometimes gets stuck in a recessionary gap and can't get itself out without government intervention. 
B) Keynesians believe the economy itself sometimes takes too long to eliminate the recessionary gap and return to full-employment output. 
C) Keynesians are generally in favor of increasing taxes. 
D) a and b 
E) a and c 
A) Keynesians believe the economy sometimes gets stuck in a recessionary gap and can't get itself out without government intervention. 
B) Keynesians believe the economy itself sometimes takes too long to eliminate the recessionary gap and return to full-employment output. 
C) Keynesians are generally in favor of increasing taxes. 
D) a and b 
E) a and c

Exam 11: Fiscal Policy and the Federal Budget

Fiscal policy refers to

In June 2012,the public debt in the United States was approximately

Which of the following is an example of crowding out?

All other things held constant,lower marginal (income)tax rates

The AD curve shifts to the left with a __________ in government purchases (G)or a __________ in taxes.

Increased government spending and tax cuts characterize

In 2011,the top 50 percent of income earners in the U.S.paid about __________ percent of the total federal income taxes.

The U.S.income tax is currently a __________ tax.

If there is complete crowding out as a result of an increase in government spending there will be

The AD curve shifts to the right with a __________ in government purchases (G)or a __________ in taxes.

When the government decides to increase income taxes,this is an example of contractionary fiscal policy.

Crowding out results in a decrease in

Crowding out results when an increase in government spending leads to declines in consumption,investment,and/or net exports.

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 42,001st dollar of taxable income earned?

In 2013,federal government spending made up approximately __________ percent of GDP in the United States.

The Laffer curve makes the point that cutting a very high marginal tax rate can __________ the tax base enough so that tax revenues __________.

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base falls from $400 billion to $375 billion.As a result,tax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

If there is complete crowding out,the change in Real GDP that results from a given change in autonomous spending will be

An example of expansionary fiscal policy is

When the economy is in a recessionary gap,Keynesian economists will often advocate expansionary policy measures.Why?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

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

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

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The AD curve shifts to the left with a in government purchases (G)or a in taxes.

The AD curve shifts to the right with a in government purchases (G)or a in taxes.

The Laffer curve makes the point that cutting a very high marginal tax rate can the tax base enough so that tax revenues .

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base falls from $400 billion to $375 billion.As a result,tax revenues ,indicating the nation is on the portion of its Laffer curve.