Question 1

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

Accepted Answer

Crowding out occurs when the increase in

Question 2

Cutting taxes

Accepted Answer

A) will lower disposable income and lower spending. 
B) will raise disposable income and lower spending. 
C) will lower disposable income and raise spending. 
D) will raise disposable income and raise spending. 
A) will lower disposable income and lower spending. 
B) will raise disposable income and lower spending. 
C) will lower disposable income and raise spending. 
D) will raise disposable income and raise spending.

Question 3

Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

Accepted Answer

A) real GDP and employment. 
B) tax revenues and the federal budget surplus. 
C) disposable income and interest rates. 
D) the money supply and money demand. 
A) real GDP and employment. 
B) tax revenues and the federal budget surplus. 
C) disposable income and interest rates. 
D) the money supply and money demand.

Question 4

Table 16-5
  
-Refer to Table 16-5.The economy is in the state described by the table above.Draw the dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2,assuming that no policy is pursued.Then illustrate and explain the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing potential GDP.

Accepted Answer

@#IMG-DLM& The economy begins in equilibrium at po

Question 5

A study by Edward Prescott found that the ________ marginal tax rates in the United States relative to Europe resulted in a ________ quantity of labor supplied in the United States.

Accepted Answer

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

Question 6

Decreasing government spending ________ 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 7

Figure 16-5
 
-Refer to Figure 16-5.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

Accepted Answer

A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) contractionary automatic stabilizers. 
A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) contractionary automatic stabilizers.

Question 8

Table 16-6
  
-Refer to Table 16-6.Suppose the economy is in the state described by the table above.What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and aggregate supply diagram to illustrate the appropriate fiscal policy to use in this situation.

Accepted Answer

@#IMG-DLM& The economy begins in equilibrium at po

Question 9

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

Accepted Answer

A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than 
A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than

Question 10

A one-time tax rebate,which is not expected to be extended in future years,will

Accepted Answer

A) have a small positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand,with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand. 
A) have a small positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand,with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand.

Question 11

For the federal deficit to be lowered,

Accepted Answer

A) the federal government must decrease its spending and increase net exports. 
B) the federal government's expenditures must be lower than its tax revenue. 
C) the Federal Reserve must raise interest rates and lower the required reserve ratio. 
D) the Federal Reserve must reduce the money supply. 
A) the federal government must decrease its spending and increase net exports. 
B) the federal government's expenditures must be lower than its tax revenue. 
C) the Federal Reserve must raise interest rates and lower the required reserve ratio. 
D) the Federal Reserve must reduce the money supply.

Question 12

Which of the following is considered contractionary fiscal policy?

Accepted Answer

A) Congress increases the income tax rate. 
B) Congress increases defense spending. 
C) Legislation removes a college tuition deduction from federal income taxes. 
D) The New Jersey legislature cuts highway spending to balance its budget. 
A) Congress increases the income tax rate. 
B) Congress increases defense spending. 
C) Legislation removes a college tuition deduction from federal income taxes. 
D) The New Jersey legislature cuts highway spending to balance its budget.

Question 13

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

Accepted Answer

No,the economy could have been in an exp

Question 14

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

Accepted Answer

A) equal 
B) be less than 
C) be more than 
D) There is insufficient information given here to draw a conclusion. 
A) equal 
B) be less than 
C) be more than 
D) There is insufficient information given here to draw a conclusion.

Question 15

The impact of crowding out may be the least

Accepted Answer

A) during a deep recession. 
B) when real GDP is above but close to potential GDP. 
C) during an expansion. 
D) when real GDP is below but close to potential GDP. 
A) during a deep recession. 
B) when real GDP is above but close to potential GDP. 
C) during an expansion. 
D) when real GDP is below but close to potential GDP.

Question 16

In an open economy,the government purchases multiplier will be

Accepted Answer

A) larger as the marginal propensity to import decreases. 
B) smaller as the marginal propensity to import decreases. 
C) smaller as the marginal propensity to tax decreases. 
D) larger as the marginal propensity to consume decreases. 
A) larger as the marginal propensity to import decreases. 
B) smaller as the marginal propensity to import decreases. 
C) smaller as the marginal propensity to tax decreases. 
D) larger as the marginal propensity to consume decreases.

Question 17

Figure 16-6  
-Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

Accepted Answer

A) the unemployment rate is very low. 
B) firms are operating at below capacity. 
C) the economy is below full employment. 
D) income and profits are falling. 
E) there is pressure on wages and prices to fall. 
A) the unemployment rate is very low. 
B) firms are operating at below capacity. 
C) the economy is below full employment. 
D) income and profits are falling. 
E) there is pressure on wages and prices to fall.

Question 18

In recent economic history,the U.S.federal budget was in surplus during

Accepted Answer

A) 2001 through 2005. 
B) 1998 through 2001. 
C) 1990 through 1997. 
D) 1980 through 1989. 
A) 2001 through 2005. 
B) 1998 through 2001. 
C) 1990 through 1997. 
D) 1980 through 1989.

Question 19

A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

Accepted Answer

A) increase; rise; falls 
B) increase; fall; rises 
C) decrease; rise; falls 
D) decrease; fall; rises 
A) increase; rise; falls 
B) increase; fall; rises 
C) decrease; rise; falls 
D) decrease; fall; rises

Question 20

An increase 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

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

Cutting taxes

Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

A study by Edward Prescott found that the marginal tax rates in the United States relative to Europe resulted in a quantity of labor supplied in the United States.

Decreasing government spending the price level and equilibrium real GDP.

Figure 16-5 -Refer to Figure 16-5.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

A one-time tax rebate,which is not expected to be extended in future years,will

For the federal deficit to be lowered,

Which of the following is considered contractionary fiscal policy?

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

The impact of crowding out may be the least

In an open economy,the government purchases multiplier will be

Figure 16-6 -Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

In recent economic history,the U.S.federal budget was in surplus during

A recession tends to cause the federal budget deficit to because tax revenues and government spending on transfer payments .

An increase in individual income taxes disposable income,which consumption spending.

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

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

Cutting taxes

Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

A study by Edward Prescott found that the ________ marginal tax rates in the United States relative to Europe resulted in a ________ quantity of labor supplied in the United States.

Decreasing government spending ________ the price level and ________ equilibrium real GDP.

Figure 16-5 -Refer to Figure 16-5.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

A one-time tax rebate,which is not expected to be extended in future years,will

For the federal deficit to be lowered,

Which of the following is considered contractionary fiscal policy?

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

The impact of crowding out may be the least

In an open economy,the government purchases multiplier will be

Figure 16-6 -Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and no fiscal or monetary policy is pursued,then at point B

In recent economic history,the U.S.federal budget was in surplus during

A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

An increase in individual income taxes ________ disposable income,which ________ consumption spending.

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 study by Edward Prescott found that the marginal tax rates in the United States relative to Europe resulted in a quantity of labor supplied in the United States.

Decreasing government spending the price level and equilibrium real GDP.

A recession tends to cause the federal budget deficit to because tax revenues and government spending on transfer payments .

An increase in individual income taxes disposable income,which consumption spending.