Question 1

The Keynesian approach to fiscal policy advocates:

Accepted Answer

A)  continual budget deficits. 
B)  manipulation of aggregate demand. 
C)  budget deficits when economic growth is high. 
D)  budget surpluses when economic growth is low or negative. 
A)  continual budget deficits. 
B)  manipulation of aggregate demand. 
C)  budget deficits when economic growth is high. 
D)  budget surpluses when economic growth is low or negative.

Question 2

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Accepted Answer

A)  $430 decline in real GDP. 
B)  $430 increase in real GDP. 
C)  4.3 per cent increase in real GDP. 
D)  4.3 per cent decrease in real GDP. 
A)  $430 decline in real GDP. 
B)  $430 increase in real GDP. 
C)  4.3 per cent increase in real GDP. 
D)  4.3 per cent decrease in real GDP.

Question 3

Narrbegin Exhibit 17.3   
-According to Exhibit 17.3, if we assume the MPC is 0.8, then a shift in the AD curve from AD0 to AD3 would require an increase in government spending of:

Accepted Answer

A)  $15 billion. 
B)  $30 billion. 
C)  $150 billion. 
D)  greater than $30 billion to allow for inflation. 
A)  $15 billion. 
B)  $30 billion. 
C)  $150 billion. 
D)  greater than $30 billion to allow for inflation.

Question 4

Which of the following is not an example of an automatic stabiliser?

Accepted Answer

A)  Welfare payments. 
B)  Unemployment benefits. 
C)  Transfer payments. 
D)  Highway construction. 
A)  Welfare payments. 
B)  Unemployment benefits. 
C)  Transfer payments. 
D)  Highway construction.

Question 5

Domestic deficit is the difference between:

Accepted Answer

A)  domestically derived revenue and international governments' expenditure. 
B)  domestically derived revenue and exports. 
C)  domestically derived revenue and imports. 
D)  domestically derived revenue and domestic government expenditure. 
A)  domestically derived revenue and international governments' expenditure. 
B)  domestically derived revenue and exports. 
C)  domestically derived revenue and imports. 
D)  domestically derived revenue and domestic government expenditure.

Question 6

Narrbegin Exhibit 17.1 Aggregate demand and supply model  
-Suppose the economy in Exhibit 17.1 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.8. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Accepted Answer

A)  $200 billion. 
B)  $250 billion. 
C)  $500 billion. 
D)  $1 trillion. 
A)  $200 billion. 
B)  $250 billion. 
C)  $500 billion. 
D)  $1 trillion.

Question 7

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

Accepted Answer

A) True 
 B)False

Question 8

If the government wants to run an expansionary fiscal policy by increasing consumption, the best alternative is likely to be:

Accepted Answer

A)  an income tax cut. 
B)  a company tax cut. 
C)  an income tax rise. 
D)  a company tax rise. 
A)  an income tax cut. 
B)  a company tax cut. 
C)  an income tax rise. 
D)  a company tax rise.

Question 9

The cyclically adjusted budget deficit is the planned deficit for future times.

Accepted Answer

A) True 
 B)False

Question 10

Transfer payments are an example of a/an:

Accepted Answer

A)  discretionary stabiliser. 
B)  countercyclical stabiliser. 
C)  pro-cyclical stabiliser. 
D)  automatic stabiliser. 
A)  discretionary stabiliser. 
B)  countercyclical stabiliser. 
C)  pro-cyclical stabiliser. 
D)  automatic stabiliser.

Question 11

Assume Parliament enacts a $10 billion increase in spending and a $10 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a:

Accepted Answer

A)  $20 billion increase in aggregate demand. 
B)  $10 billion increase in aggregate demand. 
C)  $100 billion increase in aggregate demand. 
D)  $10 billion decrease in aggregate demand. 
A)  $20 billion increase in aggregate demand. 
B)  $10 billion increase in aggregate demand. 
C)  $100 billion increase in aggregate demand. 
D)  $10 billion decrease in aggregate demand.

Question 12

The objectives of the GST in Australia were to:

Accepted Answer

A)  reduce the range of goods and services attracting tax. 
B)  discourage increased rates of community saving by taxing income when it was spent rather than when it was earned. 
C)  increase the reliance on income taxation in government revenue raising. 
D)  broaden the range of goods and services attracting tax. 
A)  reduce the range of goods and services attracting tax. 
B)  discourage increased rates of community saving by taxing income when it was spent rather than when it was earned. 
C)  increase the reliance on income taxation in government revenue raising. 
D)  broaden the range of goods and services attracting tax.

Question 13

When the economy enters a prosperity phase, unemployment benefits:

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 14

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

Accepted Answer

A)  create demand-pull inflation. 
B)  lower the price level but may trigger a recession. 
C)  result in stagflation. 
D)  reduce both unemployment and inflation. 
A)  create demand-pull inflation. 
B)  lower the price level but may trigger a recession. 
C)  result in stagflation. 
D)  reduce both unemployment and inflation.

Question 15

The presence of automatic stabilisers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true?

Accepted Answer

A)  If the government has a budget deficit, the national debt is increased. 
B)  National debt is a marginal value of outstanding Commonwealth Government securities. 
C)  National debt represents the extent of future borrowing by the federal government. 
D)  A full amount of national debt is held by the central bank. 
A)  If the government has a budget deficit, the national debt is increased. 
B)  National debt is a marginal value of outstanding Commonwealth Government securities. 
C)  National debt represents the extent of future borrowing by the federal government. 
D)  A full amount of national debt is held by the central bank.

Question 17

Narrbegin Exhibit 17.2 Aggregate demand and supply model   
-Suppose the economy in Exhibit 17.2 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E2 and reduce inflation by:

Accepted Answer

A)  increasing government spending by $50 billion. 
B)  decreasing government spending by $6 billion. 
C)  decreasing government spending by $50 billion. 
D)  decreasing government spending by $100 billion. 
A)  increasing government spending by $50 billion. 
B)  decreasing government spending by $6 billion. 
C)  decreasing government spending by $50 billion. 
D)  decreasing government spending by $100 billion.

Question 18

To combat a recession, Keynesian fiscal policy recommends:

Accepted Answer

A)  an increase in taxes. 
B)  an increase in government spending. 
C)  an increase in taxes and a decrease in government purchases to balance the budget. 
D)  a reduction in both taxes and government spending. 
A)  an increase in taxes. 
B)  an increase in government spending. 
C)  an increase in taxes and a decrease in government purchases to balance the budget. 
D)  a reduction in both taxes and government spending.

Question 19

The introduction of the GST in Australia is an example of:

Accepted Answer

A)  a restructuring. 
B)  a microeconomic reform. 
C)  a monetary policy. 
D)  a fiscal policy. 
A)  a restructuring. 
B)  a microeconomic reform. 
C)  a monetary policy. 
D)  a fiscal policy.

Question 20

According to supply-side economists, substantial tax cuts will result in:

Accepted Answer

A)  a decrease in the supply of labour. 
B)  a decrease in the after-tax wage. 
C)  an increase in the AS curve. 
D)  a decrease in productive investment. 
A)  a decrease in the supply of labour. 
B)  a decrease in the after-tax wage. 
C)  an increase in the AS curve. 
D)  a decrease in productive investment.

The Keynesian approach to fiscal policy advocates:

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Narrbegin Exhibit 17.3 -According to Exhibit 17.3, if we assume the MPC is 0.8, then a shift in the AD curve from AD0 to AD3 would require an increase in government spending of:

Which of the following is not an example of an automatic stabiliser?

Domestic deficit is the difference between:

Narrbegin Exhibit 17.1 Aggregate demand and supply model -Suppose the economy in Exhibit 17.1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.8. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

If the government wants to run an expansionary fiscal policy by increasing consumption, the best alternative is likely to be:

The cyclically adjusted budget deficit is the planned deficit for future times.

Transfer payments are an example of a/an:

Assume Parliament enacts a $10 billion increase in spending and a $10 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a:

The objectives of the GST in Australia were to:

When the economy enters a prosperity phase, unemployment benefits:

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

The presence of automatic stabilisers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Which of the following is true?

Narrbegin Exhibit 17.2 Aggregate demand and supply model -Suppose the economy in Exhibit 17.2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E₂ and reduce inflation by:

To combat a recession, Keynesian fiscal policy recommends:

The introduction of the GST in Australia is an example of:

According to supply-side economists, substantial tax cuts will result in:

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

The Keynesian approach to fiscal policy advocates:

A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:

Narrbegin Exhibit 17.3 -According to Exhibit 17.3, if we assume the MPC is 0.8, then a shift in the AD curve from AD0 to AD3 would require an increase in government spending of:

Which of the following is not an example of an automatic stabiliser?

Domestic deficit is the difference between:

Narrbegin Exhibit 17.1 Aggregate demand and supply model -Suppose the economy in Exhibit 17.1 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.8. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Automatic stabilisers are government programs that tend to push the federal budget toward deficit as the real GDP rises and toward surplus as the real GDP falls.

If the government wants to run an expansionary fiscal policy by increasing consumption, the best alternative is likely to be:

The cyclically adjusted budget deficit is the planned deficit for future times.

Transfer payments are an example of a/an:

Assume Parliament enacts a $10 billion increase in spending and a $10 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a:

The objectives of the GST in Australia were to:

When the economy enters a prosperity phase, unemployment benefits:

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

The presence of automatic stabilisers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Which of the following is true?

Narrbegin Exhibit 17.2 Aggregate demand and supply model -Suppose the economy in Exhibit 17.2 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E2 and reduce inflation by:

To combat a recession, Keynesian fiscal policy recommends:

The introduction of the GST in Australia is an example of:

According to supply-side economists, substantial tax cuts will result in:

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

Narrbegin Exhibit 17.1 Aggregate demand and supply model -Suppose the economy in Exhibit 17.1 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.8. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Narrbegin Exhibit 17.2 Aggregate demand and supply model -Suppose the economy in Exhibit 17.2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E₂ and reduce inflation by: