Question 1

Increases in government spending will lower the long-term growth rate of GDP if it lowers ________ spending,and the government purchases ________ goods and not ________ goods.

Accepted Answer

A)  net export spending; investment; consumption 
B)  consumption; investment; consumption 
C)  net export spending; consumption; investment 
D)  investment; consumption; investment 
A)  net export spending; investment; consumption 
B)  consumption; investment; consumption 
C)  net export spending; consumption; investment 
D)  investment; consumption; investment

Question 2

If the federal government's expenditures are less than its tax revenues,then

Accepted Answer

A)  a budget surplus results. 
B)  a budget deficit results. 
C)  the budget is balanced. 
D)  the government is deficit spending. 
A)  a budget surplus results. 
B)  a budget deficit results. 
C)  the budget is balanced. 
D)  the government is deficit spending.

Question 3

Suppose that the nominal wage,the expected and actual price levels,and the expected and actual inflation rates for a hypothetical economy in 2013 are presented in the following table.What is the expected real wage rate in 2013?

Accepted Answer

A)  $28.57 
B)  $29.73 
C)  $29.41 
D)  $28.12 
A)  $28.57 
B)  $29.73 
C)  $29.41 
D)  $28.12

Question 4

Explain why crowding out might still occur even if the increase in government spending is funded by borrowing on global financial markets.

Accepted Answer

An increase in government spending not f

Question 5

What is the difference between federal purchases and federal expenditures?

Accepted Answer

Federal purchases refer to federal spend

Question 6

Just as real GDP ________ potential GDP in the long run,the unemployment rate ________ the natural rate of unemployment in the long-run.

Accepted Answer

A)  is not related to; is not related to 
B)  is greater than; is greater than 
C)  equals; equals 
D)  is less than; is less than 
A)  is not related to; is not related to 
B)  is greater than; is greater than 
C)  equals; equals 
D)  is less than; is less than

Question 7

Slow growth in aggregate demand leads to ________ inflation and ________ unemployment.

Accepted Answer

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

Question 8

Using the following table,answer the following questions.The numbers in the table are in billions of dollars.
   a. What is the equilibrium level of real GDP?
b. What is the MPC?
c. If potential GDP is $4000 billion,is the economy at full employment? If not,what is the condition of the economy?
d. If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a. Equilibrium real GDP is determined wh

Question 9

A(n)________ in private expenditure as a result of a(n)________ in government purchases is called crowding out.

Accepted Answer

A)  increase; decrease 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; increase 
A)  increase; decrease 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; increase

Question 10

What is long-run crowding out?

Accepted Answer

Most economists agree that a permanent i

Question 11

Figure 17.7  
-Suppose that the economy is at point A on the Phillips curve in Figure 17.7.If the aggregate demand curve shifts to the right by the same amount as long-run aggregate supply,then the economy will

Accepted Answer

A)  remain at point A on the Phillips curve. 
B)  move to point B on the Phillips curve. 
C)  move to point C on the Phillips curve. 
D)  move to point D on the Phillips curve. 
A)  remain at point A on the Phillips curve. 
B)  move to point B on the Phillips curve. 
C)  move to point C on the Phillips curve. 
D)  move to point D on the Phillips curve.

Question 12

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

Accepted Answer

A)  10 
B)  11.1 
C)  5.3 
D)  100 
A)  10 
B)  11.1 
C)  5.3 
D)  100

Question 13

Assume that the economy is in the state described by the following table.
   Draw a 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 the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing at potential GDP.Provide an explanation.

Accepted Answer

The economy begins in equilibrium at poi

Question 14

If policy makers implement expansionary fiscal policy and do not take into account crowding out,equilibrium GDP is likely to

Accepted Answer

A)  be at potential GDP. 
B)  be above potential GDP. 
C)  be below potential GDP. 
D)  cause an inflationary gap. 
A)  be at potential GDP. 
B)  be above potential GDP. 
C)  be below potential GDP. 
D)  cause an inflationary gap.

Question 15

The largest share of Australian federal government welfare payments in 2013/14 went to

Accepted Answer

A)  unemployment benefits. 
B)  age pensions and services to the aged. 
C)  disability pensions and expenditures. 
D)  payments to families with children. 
A)  unemployment benefits. 
B)  age pensions and services to the aged. 
C)  disability pensions and expenditures. 
D)  payments to families with children.

Question 16

Government budget deficits can lead to higher real interest rates,which will reduce private investment.

Accepted Answer

A) True 
 B)False

Question 17

A federal budget deficit acts as an automatic stabiliser because

Accepted Answer

A)  government tax revenues decrease during a recession. 
B)  unemployment benefit payments decrease during a recession. 
C)  tax receipts decrease during expansionary periods. 
D)  Medicare payments increase during expansionary periods. 
A)  government tax revenues decrease during a recession. 
B)  unemployment benefit payments decrease during a recession. 
C)  tax receipts decrease during expansionary periods. 
D)  Medicare payments increase during expansionary periods.

Question 18

Which of the following is considered expansionary fiscal policy?

Accepted Answer

A)  The government decreases the income tax rate. 
B)  The government increases defence spending due to a change in priorities. 
C)  Legislation that increases education expense deductions from federal income taxes. 
D)  A state (not federal) government cuts highway spending to balance its budget. 
A)  The government decreases the income tax rate. 
B)  The government increases defence spending due to a change in priorities. 
C)  Legislation that increases education expense deductions from federal income taxes. 
D)  A state (not federal) government cuts highway spending to balance its budget.

Question 19

Government net debt in Australia was highest in which of the following time periods?

Accepted Answer

A)  1982/83 
B)  1989/90 
C)  1995/96 
D)  2008/09 
A)  1982/83 
B)  1989/90 
C)  1995/96 
D)  2008/09

Question 20

What is fiscal policy,and who is responsible for fiscal policy?

Accepted Answer

Fiscal policy refers to change

Increases in government spending will lower the long-term growth rate of GDP if it lowers spending,and the government purchases goods and not goods.

If the federal government's expenditures are less than its tax revenues,then

Suppose that the nominal wage,the expected and actual price levels,and the expected and actual inflation rates for a hypothetical economy in 2013 are presented in the following table.What is the expected real wage rate in 2013?

Explain why crowding out might still occur even if the increase in government spending is funded by borrowing on global financial markets.

What is the difference between federal purchases and federal expenditures?

Just as real GDP potential GDP in the long run,the unemployment rate the natural rate of unemployment in the long-run.

Slow growth in aggregate demand leads to inflation and unemployment.

A(n) in private expenditure as a result of a(n) in government purchases is called crowding out.

What is long-run crowding out?

Figure 17.7 -Suppose that the economy is at point A on the Phillips curve in Figure 17.7.If the aggregate demand curve shifts to the right by the same amount as long-run aggregate supply,then the economy will

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

If policy makers implement expansionary fiscal policy and do not take into account crowding out,equilibrium GDP is likely to

The largest share of Australian federal government welfare payments in 2013/14 went to

Government budget deficits can lead to higher real interest rates,which will reduce private investment.

A federal budget deficit acts as an automatic stabiliser because

Which of the following is considered expansionary fiscal policy?

Government net debt in Australia was highest in which of the following time periods?

What is fiscal policy,and who is responsible for fiscal policy?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 17: Monetary Policy

Increases in government spending will lower the long-term growth rate of GDP if it lowers ________ spending,and the government purchases ________ goods and not ________ goods.

If the federal government's expenditures are less than its tax revenues,then

Suppose that the nominal wage,the expected and actual price levels,and the expected and actual inflation rates for a hypothetical economy in 2013 are presented in the following table.What is the expected real wage rate in 2013?

Explain why crowding out might still occur even if the increase in government spending is funded by borrowing on global financial markets.

What is the difference between federal purchases and federal expenditures?

Just as real GDP ________ potential GDP in the long run,the unemployment rate ________ the natural rate of unemployment in the long-run.

Slow growth in aggregate demand leads to ________ inflation and ________ unemployment.

A(n)________ in private expenditure as a result of a(n)________ in government purchases is called crowding out.

What is long-run crowding out?

Figure 17.7 -Suppose that the economy is at point A on the Phillips curve in Figure 17.7.If the aggregate demand curve shifts to the right by the same amount as long-run aggregate supply,then the economy will

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

If policy makers implement expansionary fiscal policy and do not take into account crowding out,equilibrium GDP is likely to

The largest share of Australian federal government welfare payments in 2013/14 went to

Government budget deficits can lead to higher real interest rates,which will reduce private investment.

A federal budget deficit acts as an automatic stabiliser because

Which of the following is considered expansionary fiscal policy?

Government net debt in Australia was highest in which of the following time periods?

What is fiscal policy,and who is responsible for fiscal policy?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Increases in government spending will lower the long-term growth rate of GDP if it lowers spending,and the government purchases goods and not goods.

Just as real GDP potential GDP in the long run,the unemployment rate the natural rate of unemployment in the long-run.

Slow growth in aggregate demand leads to inflation and unemployment.

A(n) in private expenditure as a result of a(n) in government purchases is called crowding out.