Question 1

State and local governments rely on ________ as their primary source of tax receipts.

Accepted Answer

A) personal taxes 
B) contributions for social insurance 
C) indirect business taxes 
D) corporate taxes 
A) personal taxes 
B) contributions for social insurance 
C) indirect business taxes 
D) corporate taxes

Question 2

Which of the following would not act as an automatic stabilizer?

Accepted Answer

A) Unemployment insurance 
B) Government purchases 
C) Personal income taxes 
D) Corporate income taxes 
A) Unemployment insurance 
B) Government purchases 
C) Personal income taxes 
D) Corporate income taxes

Question 3

Interest payments by the government as a share of GDP

Accepted Answer

A) have steadily increased from the 1940s to the 2010s. 
B) remained fairly steady from the 1940s to the 2010s. 
C) increased in the 2000s and 2010s,but were fairly steady before that. 
D) increased sharply in the 1940s and 1980s. 
A) have steadily increased from the 1940s to the 2010s. 
B) remained fairly steady from the 1940s to the 2010s. 
C) increased in the 2000s and 2010s,but were fairly steady before that. 
D) increased sharply in the 1940s and 1980s.

Question 4

An example of an automatic stabilizer is

Accepted Answer

A) consumer spending. 
B) inflation. 
C) unemployment insurance. 
D) discretionary fiscal policy. 
A) consumer spending. 
B) inflation. 
C) unemployment insurance. 
D) discretionary fiscal policy.

Question 5

A decreased government deficit created by a lump-sum tax increase will increase national saving if

Accepted Answer

A) the value of government bonds outstanding grows slower than the public's wealth. 
B) it causes consumption to fall. 
C) the government runs a primary surplus as a result. 
D) the real interest rate is less than the growth rate of real GNP. 
A) the value of government bonds outstanding grows slower than the public's wealth. 
B) it causes consumption to fall. 
C) the government runs a primary surplus as a result. 
D) the real interest rate is less than the growth rate of real GNP.

Question 6

The type of tax receipts that has shown the largest growth since the end of World War II has been

Accepted Answer

A) personal taxes. 
B) contributions for social insurance. 
C) taxes on production and imports. 
D) corporate taxes. 
A) personal taxes. 
B) contributions for social insurance. 
C) taxes on production and imports. 
D) corporate taxes.

Question 7

If the deficit is 0.08 times GDP,the existing debt/GDP ratio is 0.8,and the growth rate of nominal GDP is 0.05,then the change in the debt-GDP ratio is

Accepted Answer

A) +0.08 
B) +0.04. 
C) 0) 
D) -0.08. 
A) +0.08 
B) +0.04. 
C) 0) 
D) -0.08.

Question 8

An increase in the marginal tax rate,with the average tax rate held constant,will

Accepted Answer

A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate,but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate. 
A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate,but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.

Question 9

Consider an economy that has the following monetary data.
 
The monetary base and the money supply are expected to grow at a constant rate of 20% per year.Inflation and expected inflation are 20% per year.Suppose that bank reserves and currency pay no interest,all currency is held by the public,and bank deposits pay no interest.What is the cost to the public of the inflation tax?

Accepted Answer

A) $60 
B) $140 
C) $190 
D) $200 
A) $60 
B) $140 
C) $190 
D) $200

Question 10

According to the Ricardian equivalence proposition,current deficits

Accepted Answer

A) will not affect consumption or national saving. 
B) will affect consumption but not national saving. 
C) will affect national saving but not consumption. 
D) will affect both consumption and national saving. 
A) will not affect consumption or national saving. 
B) will affect consumption but not national saving. 
C) will affect national saving but not consumption. 
D) will affect both consumption and national saving.

Question 11

Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds)are based on the premise that

Accepted Answer

A) the returns to stocks are higher than the returns to bonds. 
B) the returns to stocks aren't as risky as the returns to bonds. 
C) the transactions costs for investing in stocks are lower than the transactions costs for investing in bonds. 
D) stocks are more liquid than bonds. 
A) the returns to stocks are higher than the returns to bonds. 
B) the returns to stocks aren't as risky as the returns to bonds. 
C) the transactions costs for investing in stocks are lower than the transactions costs for investing in bonds. 
D) stocks are more liquid than bonds.

Question 12

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

Accepted Answer

People may face borrowing cons

Question 13

State governments in the United States can raise revenue by all the following means EXCEPT

Accepted Answer

A) increasing income taxes. 
B) increasing taxes on corporate profits. 
C) increasing sales taxes. 
D) increasing the money supply. 
A) increasing income taxes. 
B) increasing taxes on corporate profits. 
C) increasing sales taxes. 
D) increasing the money supply.

Question 14

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

Accepted Answer

A) the rise in real money holdings outweighs the decline in inflation. 
B) the rise in inflation outweighs the decline in real money holdings. 
C) the rise in inflation ratio outweighs the decline in the real supply of currency. 
D) the rise in the real supply of currency outweighs the decline in inflation. 
A) the rise in real money holdings outweighs the decline in inflation. 
B) the rise in inflation outweighs the decline in real money holdings. 
C) the rise in inflation ratio outweighs the decline in the real supply of currency. 
D) the rise in the real supply of currency outweighs the decline in inflation.

Question 15

Increases in the debt-GDP ratio are primarily caused by

Accepted Answer

A) a high growth rate of GDP. 
B) a high government deficit relative to GDP. 
C) increases in government borrowing through bonds. 
D) increases in interest rates. 
A) a high growth rate of GDP. 
B) a high government deficit relative to GDP. 
C) increases in government borrowing through bonds. 
D) increases in interest rates.

Question 16

In which case would you be most likely to expect inflation to occur?

Accepted Answer

A) The government runs a sustained government deficit by lowering taxes. 
B) The government runs a sustained government deficit by increasing purchases. 
C) The government runs a sustained primary deficit by increasing purchases. 
D) The government funds its sustained deficit by increasing the money supply. 
A) The government runs a sustained government deficit by lowering taxes. 
B) The government runs a sustained government deficit by increasing purchases. 
C) The government runs a sustained primary deficit by increasing purchases. 
D) The government funds its sustained deficit by increasing the money supply.

Question 17

Compared with other countries in the OECD,French government spending relative to GDP is

Accepted Answer

A) among the highest. 
B) about average. 
C) slightly below average. 
D) among the lowest. 
A) among the highest. 
B) about average. 
C) slightly below average. 
D) among the lowest.

Question 18

The amount the government budget deficit would be if the economy were at full employment is known as the

Accepted Answer

A) primary deficit. 
B) full-employment deficit. 
C) natural deficit. 
D) current deficit. 
A) primary deficit. 
B) full-employment deficit. 
C) natural deficit. 
D) current deficit.

Question 19

At the beginning of year one,there is no government debt outstanding.The government runs a $100 billion deficit in year one.Interest at a nominal rate of 10% must be paid starting in year two.Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%.Assume the government balances its primary budget in the future and the interest rate and growth rate do not change.
(a)What will be the government deficit in years two,three,four,and five?
(b)What will be the value of government bonds outstanding at the end of the fifth year?
(c)What will be the debt-GDP ratio at the end of year five?

Accepted Answer

(a)$10,$11,$12.1,$13

Question 20

The relationship between the government deficit and the change in the monetary base is

Accepted Answer

A) deficit equals change in government debt held by the public minus change in monetary base. 
B) deficit equals change in government debt held by the public plus change in monetary base. 
C) deficit equals change in government debt outstanding plus change in monetary base. 
D) deficit equals change in government debt outstanding minus change in monetary base. 
A) deficit equals change in government debt held by the public minus change in monetary base. 
B) deficit equals change in government debt held by the public plus change in monetary base. 
C) deficit equals change in government debt outstanding plus change in monetary base. 
D) deficit equals change in government debt outstanding minus change in monetary base.

State and local governments rely on ________ as their primary source of tax receipts.

Which of the following would not act as an automatic stabilizer?

Interest payments by the government as a share of GDP

An example of an automatic stabilizer is

A decreased government deficit created by a lump-sum tax increase will increase national saving if

The type of tax receipts that has shown the largest growth since the end of World War II has been

If the deficit is 0.08 times GDP,the existing debt/GDP ratio is 0.8,and the growth rate of nominal GDP is 0.05,then the change in the debt-GDP ratio is

An increase in the marginal tax rate,with the average tax rate held constant,will

According to the Ricardian equivalence proposition,current deficits

Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds)are based on the premise that

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

State governments in the United States can raise revenue by all the following means EXCEPT

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

Increases in the debt-GDP ratio are primarily caused by

In which case would you be most likely to expect inflation to occur?

Compared with other countries in the OECD,French government spending relative to GDP is

The amount the government budget deficit would be if the economy were at full employment is known as the

The relationship between the government deficit and the change in the monetary base is

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters

Exam 15: Government Spending and Its Financing

State and local governments rely on ________ as their primary source of tax receipts.

Which of the following would not act as an automatic stabilizer?

Interest payments by the government as a share of GDP

An example of an automatic stabilizer is

A decreased government deficit created by a lump-sum tax increase will increase national saving if

The type of tax receipts that has shown the largest growth since the end of World War II has been

If the deficit is 0.08 times GDP,the existing debt/GDP ratio is 0.8,and the growth rate of nominal GDP is 0.05,then the change in the debt-GDP ratio is

An increase in the marginal tax rate,with the average tax rate held constant,will

According to the Ricardian equivalence proposition,current deficits

Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds)are based on the premise that

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

State governments in the United States can raise revenue by all the following means EXCEPT

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

Increases in the debt-GDP ratio are primarily caused by

In which case would you be most likely to expect inflation to occur?

Compared with other countries in the OECD,French government spending relative to GDP is

The amount the government budget deficit would be if the economy were at full employment is known as the

The relationship between the government deficit and the change in the monetary base is

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters