Question 1

Australia's current national debt is:

Accepted Answer

A)  a burden because each person owes on average $1500-2000. 
B)  a burden because most of it is held by overseas interests. 
C)  a burden in comparison to Japan's current national debt. 
D)  not a burden because it is mostly internal and not owed to foreigners. 
A)  a burden because each person owes on average $1500-2000. 
B)  a burden because most of it is held by overseas interests. 
C)  a burden in comparison to Japan's current national debt. 
D)  not a burden because it is mostly internal and not owed to foreigners.

Question 2

The difference between the domestic deficit and the overall deficit is:

Accepted Answer

A)  revenue collected from overseas. 
B)  government spending on imports. 
C)  tax revenue minus government spending. 
D)  inflation. 
E)  automatic stabilisers. 
A)  revenue collected from overseas. 
B)  government spending on imports. 
C)  tax revenue minus government spending. 
D)  inflation. 
E)  automatic stabilisers.

Question 3

The Federal Treasury Department forecasts:

Accepted Answer

A)  an increase in prices in local supermarket. 
B)  wage growth of miners in coal mining region. 
C)  unemployment in a fishery industry in a local region. 
D)  GDP growth, inflation, the current account deficit. 
A)  an increase in prices in local supermarket. 
B)  wage growth of miners in coal mining region. 
C)  unemployment in a fishery industry in a local region. 
D)  GDP growth, inflation, the current account deficit.

Question 4

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 increase its spending 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 5

Assume the marginal propensity to consume (MPC) is 0.8 and the government cuts taxes by $250 billion. The aggregate demand curve will shift to the:

Accepted Answer

A)  right by $1000 billion. 
B)  right by $750 billion. 
C)  left by $1000 billion. 
D)  left by $750 billion. 
A)  right by $1000 billion. 
B)  right by $750 billion. 
C)  left by $1000 billion. 
D)  left by $750 billion.

Question 6

The Federal Treasury budget:

Accepted Answer

A)  is accepted by economists without a doubt. 
B)  is not really important as it is just a forecast. 
C)  is not a big media event. 
D)  is scrutinised by economic analysts. 
A)  is accepted by economists without a doubt. 
B)  is not really important as it is just a forecast. 
C)  is not a big media event. 
D)  is scrutinised by economic analysts.

Question 7

If the treasurer announces a large, expected budget surplus for the forthcoming year, this is a sign that the government's fiscal stance will be:

Accepted Answer

A)  expansionary. 
B)  contractionary. 
C)  neutral. 
D)  negative. 
A)  expansionary. 
B)  contractionary. 
C)  neutral. 
D)  negative.

Question 8

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue. The result of this balanced-budget approach is a:

Accepted Answer

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

Question 9

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Accepted Answer

A)  government spending by $250 billion. 
B)  taxes by $100 billion. 
C)  taxes by $1000 billion. 
D)  government spending by $1000 billion. 
A)  government spending by $250 billion. 
B)  taxes by $100 billion. 
C)  taxes by $1000 billion. 
D)  government spending by $1000 billion.

Question 10

Lower taxes create a multiplier effect in the economy. It leads to:

Accepted Answer

A)  decreases in prices. 
B)  technological advances. 
C)  increases in aggregate demand. 
D)  subsidies. 
A)  decreases in prices. 
B)  technological advances. 
C)  increases in aggregate demand. 
D)  subsidies.

Question 11

The national debt is always a burden on future generations.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  cause only the AD curve to increase. 
B)  cause the AD curve to increase but the AS curve to decrease. 
C)  cause both the AD and AS curves to increase. 
D)  have little effect on either the AD or AS curves. 
A)  cause only the AD curve to increase. 
B)  cause the AD curve to increase but the AS curve to decrease. 
C)  cause both the AD and AS curves to increase. 
D)  have little effect on either the AD or AS curves.

Question 13

If the majority of national debt is held domestically, economists would consider this not to be a burden because:

Accepted Answer

A)  we owe the debt to ourselves. 
B)  it is only future generations that will have to repay the debt, not us. 
C)  we can easily pay for this debt out of export income. 
D)  the government knows how to spend the money better than us. 
A)  we owe the debt to ourselves. 
B)  it is only future generations that will have to repay the debt, not us. 
C)  we can easily pay for this debt out of export income. 
D)  the government knows how to spend the money better than us.

Question 14

If government deficits stimulate the private economy:

Accepted Answer

A)  'crowding out' must be zero. 
B)  investment may rise. 
C)  'crowding out' is more than offset by increases in investment demand. 
D)  'crowding out' and 'crowding in' cancel each other out. 
A)  'crowding out' must be zero. 
B)  investment may rise. 
C)  'crowding out' is more than offset by increases in investment demand. 
D)  'crowding out' and 'crowding in' cancel each other out.

Question 15

When the government engages in debt financing to fund a budget deficit:

Accepted Answer

A)  the money supply will increase. 
B)  government securities are effectively monetised. 
C)  national debt will rise if the securities are bought by the private sector or by overseas financial institutions. 
D)  national debt will rise if the securities are bought by the RBA. 
A)  the money supply will increase. 
B)  government securities are effectively monetised. 
C)  national debt will rise if the securities are bought by the private sector or by overseas financial institutions. 
D)  national debt will rise if the securities are bought by the RBA.

Question 16

Automatic stabilisers are:

Accepted Answer

A)  state expenditures and revenues. 
B)  similar to discretionary fiscal policy. 
C)  federal expenditures and tax revenue that changes over the course of the business cycle. 
D)  mechanisms allowed to accelerate the boom and amplify the recession. 
A)  state expenditures and revenues. 
B)  similar to discretionary fiscal policy. 
C)  federal expenditures and tax revenue that changes over the course of the business cycle. 
D)  mechanisms allowed to accelerate the boom and amplify the recession.

Question 17

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:

Accepted Answer

A)  tax multiplier magnifies the effect of taxes on the level of real GDP. 
B)  tax then generates a $100 million decline in real GDP. 
C)  level of real GDP expands by $100 million. 
D)  level of real GDP expands by $100 million multiplied by the MPC. 
A)  tax multiplier magnifies the effect of taxes on the level of real GDP. 
B)  tax then generates a $100 million decline in real GDP. 
C)  level of real GDP expands by $100 million. 
D)  level of real GDP expands by $100 million multiplied by the MPC.

Question 18

Microeconomic reform in Australia included:

Accepted Answer

A)  the reduction of tariffs. 
B)  higher regulation of the Australian financial system. 
C)  holding interest rates under controls. 
D)  less flexibility in work practices. 
A)  the reduction of tariffs. 
B)  higher regulation of the Australian financial system. 
C)  holding interest rates under controls. 
D)  less flexibility in work practices.

Question 19

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Accepted Answer

A)  demand-side fiscal policy. 
B)  demand-side monetary policy. 
C)  supply-side fiscal policy. 
D)  supply-side monetary policy. 
E)  labour market reform. 
A)  demand-side fiscal policy. 
B)  demand-side monetary policy. 
C)  supply-side fiscal policy. 
D)  supply-side monetary policy. 
E)  labour market reform.

Question 20

Which of the following statements is true?

Accepted Answer

A)  A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. 
B)  According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. 
C)  The presence of the automatic stabilisers tends to destabilise the economy. 
D)  To combat inflation, Keynesians recommend lower taxes and greater government
Spending. 
A)  A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. 
B)  According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. 
C)  The presence of the automatic stabilisers tends to destabilise the economy. 
D)  To combat inflation, Keynesians recommend lower taxes and greater government
Spending.

Australia's current national debt is:

The difference between the domestic deficit and the overall deficit is:

The Federal Treasury Department forecasts:

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 increase its spending by:

Assume the marginal propensity to consume (MPC) is 0.8 and the government cuts taxes by $250 billion. The aggregate demand curve will shift to the:

The Federal Treasury budget:

If the treasurer announces a large, expected budget surplus for the forthcoming year, this is a sign that the government's fiscal stance will be:

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue. The result of this balanced-budget approach is a:

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Lower taxes create a multiplier effect in the economy. It leads to:

The national debt is always a burden on future generations.

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

If the majority of national debt is held domestically, economists would consider this not to be a burden because:

If government deficits stimulate the private economy:

When the government engages in debt financing to fund a budget deficit:

Automatic stabilisers are:

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:

Microeconomic reform in Australia included:

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Which of the following statements is true?

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

Australia's current national debt is:

The difference between the domestic deficit and the overall deficit is:

The Federal Treasury Department forecasts:

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 increase its spending by:

Assume the marginal propensity to consume (MPC) is 0.8 and the government cuts taxes by $250 billion. The aggregate demand curve will shift to the:

The Federal Treasury budget:

If the treasurer announces a large, expected budget surplus for the forthcoming year, this is a sign that the government's fiscal stance will be:

Assume Parliament enacts a $10 billion decrease in spending and a $10 billion decrease in tax revenue. The result of this balanced-budget approach is a:

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

Lower taxes create a multiplier effect in the economy. It leads to:

The national debt is always a burden on future generations.

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

If the majority of national debt is held domestically, economists would consider this not to be a burden because:

If government deficits stimulate the private economy:

When the government engages in debt financing to fund a budget deficit:

Automatic stabilisers are:

When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the:

Microeconomic reform in Australia included:

The tariff reforms that Australia has undergone over the past 20 years are an example of:

Which of the following statements is true?

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 increase its spending by: