Question 1

With low inflation and high unemployment, the most likely fiscal stance of the federal government would be:

Accepted Answer

A)  neutral. 
B)  expansionary. 
C)  contractionary. 
D)  pro-cyclical. 
A)  neutral. 
B)  expansionary. 
C)  contractionary. 
D)  pro-cyclical. B

Question 2

Increases in the fraction of national debt held by foreigners will _____ the burden of debt service on future generations _____.

Accepted Answer

A)  decrease; because it is easier for the borrowing nation to default on the debt 
B)  decrease; but may make the country more vulnerable to foreign intervention 
C)  decrease; because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically 
D)  increase; because taxes to pay the debt are collected within the country but more interest payments on the debt are sent outside 
E)  increase; because foreign bond-holding pushes up interest rates at date of issue, increasing crowding out 
A)  decrease; because it is easier for the borrowing nation to default on the debt 
B)  decrease; but may make the country more vulnerable to foreign intervention 
C)  decrease; because debt servicing accomplished by increases in the money supply is not as inflationary as it would be if all debt were held domestically 
D)  increase; because taxes to pay the debt are collected within the country but more interest payments on the debt are sent outside 
E)  increase; because foreign bond-holding pushes up interest rates at date of issue, increasing crowding out D

Question 3

A decrease in real GDP would affect the Australian economy by:

Accepted Answer

A)  cutting tax revenues and raising government expenditures. 
B)  cutting government expenditures and raising tax revenues. 
C)  raising both tax revenues and government expenditures. 
D)  cutting both government expenditures and tax revenues. 
A)  cutting tax revenues and raising government expenditures. 
B)  cutting government expenditures and raising tax revenues. 
C)  raising both tax revenues and government expenditures. 
D)  cutting both government expenditures and tax revenues. A

Question 4

'Crowding out' refers to the government's increased demand for credit, which:

Accepted Answer

A)  displaces some private-sector consumption by decreasing the price level. 
B)  displaces some private-sector borrowing by decreasing the interest rate. 
C)  displaces some private-sector borrowing by increasing the interest rate. 
D)  hires labour away from the private sector. 
A)  displaces some private-sector consumption by decreasing the price level. 
B)  displaces some private-sector borrowing by decreasing the interest rate. 
C)  displaces some private-sector borrowing by increasing the interest rate. 
D)  hires labour away from the private sector.

Question 5

A $10 million increase in government spending has a different economic impact to a $10 million tax cut.

Accepted Answer

A) True 
 B)False

Question 6

If government reduces taxes by $10 billion and the MPC is equal to 0.8, the spending is expected to increase by:

Accepted Answer

A)  $0.8 billion. 
B)  $5 billion. 
C)  $8 billion. 
D)  $10 billion. 
A)  $0.8 billion. 
B)  $5 billion. 
C)  $8 billion. 
D)  $10 billion.

Question 7

Narrbegin Exhibit 17.3   
-According to Exhibit 17.3, if we assume the MPC is 0.9, then a shift in the AD curve from AD0 to AD1 would require an increase in government spending of:

Accepted Answer

A)  $50 billion. 
B)  $10 billion. 
C)  $5 billion. 
D)  greater than $50 billion to allow for inflation. 
E)  less than $10 billion to allow for inflation. 
A)  $50 billion. 
B)  $10 billion. 
C)  $5 billion. 
D)  greater than $50 billion to allow for inflation. 
E)  less than $10 billion to allow for inflation.

Question 8

The Laffer curve shows that as tax rates rise, tax revenue:

Accepted Answer

A)  always rises. 
B)  first rises, then falls and then rises again. 
C)  always falls. 
D)  first rises and then falls. 
A)  always rises. 
B)  first rises, then falls and then rises again. 
C)  always falls. 
D)  first rises and then falls.

Question 9

Personal income taxes:

Accepted Answer

A)  make recessions and inflationary episodes more severe. 
B)  make recessions and inflationary episodes less severe. 
C)  make recessions more severe and inflationary episodes less severe. 
D)  make recessions less severe and inflationary episodes more severe. 
A)  make recessions and inflationary episodes more severe. 
B)  make recessions and inflationary episodes less severe. 
C)  make recessions more severe and inflationary episodes less severe. 
D)  make recessions less severe and inflationary episodes more severe.

Question 10

What is the spending multiplier if the MPC is equal 0.75?

Accepted Answer

A)  0.75. 
B) 1. 
C) 4. 
D)  7.5. 
A)  0.75. 
B) 1. 
C) 4. 
D)  7.5.

Question 11

Economists sometimes look at the cyclically adjusted budget balance in order to determine:

Accepted Answer

A)  the domestic budget balance. 
B)  the fiscal stance after adjusting for automatic stabilisers. 
C)  the fiscal stance after adjusting for inflation. 
D)  the fiscal stance after adjusting for government spending on imports. 
A)  the domestic budget balance. 
B)  the fiscal stance after adjusting for automatic stabilisers. 
C)  the fiscal stance after adjusting for inflation. 
D)  the fiscal stance after adjusting for government spending on imports.

Question 12

The objectives of the GST in Australia were to:

Accepted Answer

A)  reduce the range of goods and services attracting tax. 
B)  allow the burden of taxation to be more specific. 
C)  reduce the reliance on income taxation in government revenue raising. 
D)  allow individuals to avoid paying their taxes. 
A)  reduce the range of goods and services attracting tax. 
B)  allow the burden of taxation to be more specific. 
C)  reduce the reliance on income taxation in government revenue raising. 
D)  allow individuals to avoid paying their taxes.

Question 13

If the marginal propensity to consume (MPC) is 0.8 and the parliament votes for a $100 million tax cut. What is the change in aggregate demand?

Accepted Answer

A)  $250 million. 
B)  $200 million. 
C)  $100 million. 
D)  $80 million. 
A)  $250 million. 
B)  $200 million. 
C)  $100 million. 
D)  $80 million.

Question 14

Having a countercyclical discretionary fiscal policy would involve:

Accepted Answer

A)  running budget deficits during an expansion and surpluses during a contraction. 
B)  running budget deficits during a contraction and surpluses during an expansion. 
C)  running balanced budgets at all times. 
D)  running consistent budget deficits. 
A)  running budget deficits during an expansion and surpluses during a contraction. 
B)  running budget deficits during a contraction and surpluses during an expansion. 
C)  running balanced budgets at all times. 
D)  running consistent budget deficits.

Question 15

If the government 'monetises' its debt, then:

Accepted Answer

A)  government securities have been bought by the private sector. 
B)  government securities have been bought by the RBA. 
C)  the money supply will increase by an equal amount. 
D)  the money supply will increase. 
A)  government securities have been bought by the private sector. 
B)  government securities have been bought by the RBA. 
C)  the money supply will increase by an equal amount. 
D)  the money supply will increase.

Question 16

The deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

Accepted Answer

A)  monetary policy. 
B)  important international policy. 
C)  continuous fiscal policy. 
D)  discretionary fiscal policy. 
A)  monetary policy. 
B)  important international policy. 
C)  continuous fiscal policy. 
D)  discretionary fiscal policy.

Question 17

When the economy enters a prosperity phase, personal income tax collections:

Accepted Answer

A)  fall and so disposable income and spending fall more slowly than real GDP. 
B)  fall and so disposable income and spending do not rise as rapidly as real GDP. 
C)  rise, and so disposable income and spending do not rise as rapidly as real GDP. 
D)  rise, and so disposable income and spending fall more slowly than real GDP. 
A)  fall and so disposable income and spending fall more slowly than real GDP. 
B)  fall and so disposable income and spending do not rise as rapidly as real GDP. 
C)  rise, and so disposable income and spending do not rise as rapidly as real GDP. 
D)  rise, and so disposable income and spending fall more slowly than real GDP.

Question 18

Many economists would argue that, if the government is to run an expansionary fiscal policy, spending should focus on:

Accepted Answer

A)  consumption goods. 
B)  imports. 
C)  infrastructure. 
D)  competition. 
A)  consumption goods. 
B)  imports. 
C)  infrastructure. 
D)  competition.

Question 19

If the government runs a budget deficit by increasing spending on imports, the effectiveness of this policy will be reduced.

Accepted Answer

A) True 
 B)False

Question 20

To finance a budget deficit, the government must:

Accepted Answer

A)  reduce taxes. 
B)  buy securities. 
C)  sell securities. 
D)  increase the unemployment rate. 
A)  reduce taxes. 
B)  buy securities. 
C)  sell securities. 
D)  increase the unemployment rate.

With low inflation and high unemployment, the most likely fiscal stance of the federal government would be:

Increases in the fraction of national debt held by foreigners will _ the burden of debt service on future generations _.

A decrease in real GDP would affect the Australian economy by:

'Crowding out' refers to the government's increased demand for credit, which:

A $10 million increase in government spending has a different economic impact to a $10 million tax cut.

If government reduces taxes by $10 billion and the MPC is equal to 0.8, the spending is expected to increase by:

Narrbegin Exhibit 17.3 -According to Exhibit 17.3, if we assume the MPC is 0.9, then a shift in the AD curve from AD0 to AD1 would require an increase in government spending of:

The Laffer curve shows that as tax rates rise, tax revenue:

Personal income taxes:

What is the spending multiplier if the MPC is equal 0.75?

Economists sometimes look at the cyclically adjusted budget balance in order to determine:

The objectives of the GST in Australia were to:

If the marginal propensity to consume (MPC) is 0.8 and the parliament votes for a $100 million tax cut. What is the change in aggregate demand?

Having a countercyclical discretionary fiscal policy would involve:

If the government 'monetises' its debt, then:

The deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

When the economy enters a prosperity phase, personal income tax collections:

Many economists would argue that, if the government is to run an expansionary fiscal policy, spending should focus on:

If the government runs a budget deficit by increasing spending on imports, the effectiveness of this policy will be reduced.

To finance a budget deficit, the government must:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

International Trade and Finance

Filters

Exam 18: Macroeconomic Policy II: Fiscal Policy

With low inflation and high unemployment, the most likely fiscal stance of the federal government would be:

Increases in the fraction of national debt held by foreigners will _____ the burden of debt service on future generations _____.

A decrease in real GDP would affect the Australian economy by:

'Crowding out' refers to the government's increased demand for credit, which:

A $10 million increase in government spending has a different economic impact to a $10 million tax cut.

If government reduces taxes by $10 billion and the MPC is equal to 0.8, the spending is expected to increase by:

Narrbegin Exhibit 17.3 -According to Exhibit 17.3, if we assume the MPC is 0.9, then a shift in the AD curve from AD0 to AD1 would require an increase in government spending of:

The Laffer curve shows that as tax rates rise, tax revenue:

Personal income taxes:

What is the spending multiplier if the MPC is equal 0.75?

Economists sometimes look at the cyclically adjusted budget balance in order to determine:

The objectives of the GST in Australia were to:

If the marginal propensity to consume (MPC) is 0.8 and the parliament votes for a $100 million tax cut. What is the change in aggregate demand?

Having a countercyclical discretionary fiscal policy would involve:

If the government 'monetises' its debt, then:

The deliberate use of changes in government spending and/or taxes to alter AD and stabilise the business cycle is called:

When the economy enters a prosperity phase, personal income tax collections:

Many economists would argue that, if the government is to run an expansionary fiscal policy, spending should focus on:

If the government runs a budget deficit by increasing spending on imports, the effectiveness of this policy will be reduced.

To finance a budget deficit, the government must:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

International Trade and Finance

Filters

Increases in the fraction of national debt held by foreigners will _ the burden of debt service on future generations _.