Question 1

From the 1960s to 2012,transfer payments

Accepted Answer

A) have risen from about 25 percent to 46 percent of federal government expenditures. 
B) remained the same percentage of total federal government expenditures. 
C) have declined by half as a percentage of total federal government expenditures. 
D) have grown very slowly as a percentage of total federal government expenditures. 
A) have risen from about 25 percent to 46 percent of federal government expenditures. 
B) remained the same percentage of total federal government expenditures. 
C) have declined by half as a percentage of total federal government expenditures. 
D) have grown very slowly as a percentage of total federal government expenditures.

Question 2

Accumulating debt poses a problem for the U.S.federal government because

Accepted Answer

A) it is currently in danger of defaulting on the debt. 
B) a large debt-to-GDP ratio causes crowding out. 
C) building roads and bridges do not yield enough benefits to justify their cost. 
D) the debt has to ultimately be paid off. 
A) it is currently in danger of defaulting on the debt. 
B) a large debt-to-GDP ratio causes crowding out. 
C) building roads and bridges do not yield enough benefits to justify their cost. 
D) the debt has to ultimately be paid off.

Question 3

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase ________ through changing ________.

Accepted Answer

A) aggregate demand; government spending 
B) aggregate supply; taxes 
C) aggregate demand; taxes 
D) aggregate supply; government spending 
A) aggregate demand; government spending 
B) aggregate supply; taxes 
C) aggregate demand; taxes 
D) aggregate supply; government spending

Question 4

Table 16-3
  
-Refer to Table 16-3.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy.If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2014,which of the following will be higher than if the Congress and the president had taken no action?

Accepted Answer

A) real GDP and the unemployment rate 
B) real GDP and the inflation rate 
C) real GDP and potential GDP 
D) potential GDP and the inflation rate 
A) real GDP and the unemployment rate 
B) real GDP and the inflation rate 
C) real GDP and potential GDP 
D) potential GDP and the inflation rate

Question 5

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Accepted Answer

A) 2.78 
B) 5 
C) 6.25 
D) 100 
A) 2.78 
B) 5 
C) 6.25 
D) 100

Question 6

Figure 16-1  
-Refer to Figure 16-1.Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Accepted Answer

A) D to C. 
B) A to E. 
C) C to D. 
D) C to B. 
E) E to A. 
A) D to C. 
B) A to E. 
C) C to D. 
D) C to B. 
E) E to A.

Question 7

As the tax wedge associated with a given economic activity gets smaller,we would expect

Accepted Answer

A) more of that economic activity to occur. 
B) the distortions caused by taxes on that activity to be greater. 
C) people to engage in less of that particular activity. 
D) no change in the practice of that activity until the tax wedge ultimately disappears. 
A) more of that economic activity to occur. 
B) the distortions caused by taxes on that activity to be greater. 
C) people to engage in less of that particular activity. 
D) no change in the practice of that activity until the tax wedge ultimately disappears.

Question 8

Article Summary
In a letter to Congress, Treasury Secretary Jacob Lew stated that the United States will run out of borrowed money by Thursday, October 17 unless the $16.7 trillion debt ceiling was raised. Every Thursday, the Treasury typically rolls over $100 billion in debt as bonds mature and investors use the proceeds to buy new bonds, and Lew was concerned that without an increase in the debt ceiling, a crisis could emerge from a massive bond sell-off. Since the government had reached its current debt limit, it would only be able to use daily on-hand revenue to pay its bills without the increase in the ceiling. The Treasury expected the government to have only $30 billion per day in cash on hand by October 17, while its typical daily expenses were $60 billion. "If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," Lew said.
Source: Gregory Korte, "Treasury will run out of borrowed money by Oct. 17," USA Today, September 25, 2013.

-Refer to the Article Summary.When does the Treasury Department borrow? Why would the Treasury have to borrow more than it estimated,as was indicated by its letter to Congress to raise the debt ceiling? When would the Treasury repay what it borrowed,and who is it repaying?

Accepted Answer

When tax revenues are not sufficient to

Question 9

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Accepted Answer

A) True 
 B)False

Question 10

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Accepted Answer

A) 10 
B) 9 
C) 5 
D) 1 
A) 10 
B) 9 
C) 5 
D) 1

Question 11

When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,a $840 billion package of ________ that was the largest fiscal policy action in U.S.history.

Accepted Answer

A) spending increases and tax cuts 
B) interest rate reductions and increases in the money supply 
C) treasury bond purchases and mortgage-backed securities purchases 
D) commercial and investment bank bailouts 
A) spending increases and tax cuts 
B) interest rate reductions and increases in the money supply 
C) treasury bond purchases and mortgage-backed securities purchases 
D) commercial and investment bank bailouts

Question 12

Tax cuts on business income ________ aggregate demand.

Accepted Answer

A) would decrease 
B) would increase 
C) would not change 
D) may increase or decrease 
A) would decrease 
B) would increase 
C) would not change 
D) may increase or decrease

Question 13

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Accepted Answer

A) True 
 B)False

Question 14

Figure 16-1  
-Refer to Figure 16-1.Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.If contractionary policy is used to move the economy back to long run equilibrium,this would be depicted as a movement from ________ using the static AD-AS model in the figure above.

Accepted Answer

A) D to C 
B) C to B 
C) A to E 
D) B to A 
E) E to A 
A) D to C 
B) C to B 
C) A to E 
D) B to A 
E) E to A

Question 15

Which of the following is a reason why we should consider the federal national debt a problem?

Accepted Answer

A) The federal government is in danger of defaulting on its debt. 
B) If the debt drives up interest rates,crowding out will occur. 
C) If the debt was incurred to finance improvements in infrastructure,crowding out will occur. 
D) If the debt was incurred to finance research and development,crowding out will occur. 
A) The federal government is in danger of defaulting on its debt. 
B) If the debt drives up interest rates,crowding out will occur. 
C) If the debt was incurred to finance improvements in infrastructure,crowding out will occur. 
D) If the debt was incurred to finance research and development,crowding out will occur.

Question 16

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

Accepted Answer

A) True 
 B)False

Question 17

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Accepted Answer

A) 10 
B) 5 
C) 4 
D) 3 
A) 10 
B) 5 
C) 4 
D) 3

Question 18

Government deficits tend to increase during

Accepted Answer

A) recessions and booms. 
B) periods of war and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty. 
A) recessions and booms. 
B) periods of war and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty.

Question 19

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Accepted Answer

First,changes in government purchases af

Question 20

Reducing the marginal tax rate on income will

Accepted Answer

A) reduce the tax wedge faced by workers and increase labor supplied. 
B) raise the return to entrepreneurship and encourage the opening of new businesses. 
C) increase the after-tax return on saving,and encourage saving. 
D) All of the above are correct. 
A) reduce the tax wedge faced by workers and increase labor supplied. 
B) raise the return to entrepreneurship and encourage the opening of new businesses. 
C) increase the after-tax return on saving,and encourage saving. 
D) All of the above are correct.

From the 1960s to 2012,transfer payments

Accumulating debt poses a problem for the U.S.federal government because

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase through changing .

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

As the tax wedge associated with a given economic activity gets smaller,we would expect

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Tax cuts on business income ________ aggregate demand.

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Which of the following is a reason why we should consider the federal national debt a problem?

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Government deficits tend to increase during

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Reducing the marginal tax rate on income will

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

From the 1960s to 2012,transfer payments

Accumulating debt poses a problem for the U.S.federal government because

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase ________ through changing ________.

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

As the tax wedge associated with a given economic activity gets smaller,we would expect

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Tax cuts on business income ________ aggregate demand.

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Which of the following is a reason why we should consider the federal national debt a problem?

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Government deficits tend to increase during

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Reducing the marginal tax rate on income will

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

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase through changing .