Question 1

The three main categories of government outlays are

Accepted Answer

A) net interest payments,government investment,and government consumption expenditures. 
B) net government subsidies,the government deficit,and government purchases. 
C) government purchases,transfer payments,and net interest payments. 
D) government consumption expenditures,government investment,and transfer payments. 
A) net interest payments,government investment,and government consumption expenditures. 
B) net government subsidies,the government deficit,and government purchases. 
C) government purchases,transfer payments,and net interest payments. 
D) government consumption expenditures,government investment,and transfer payments.

Question 2

The current deficit is

Accepted Answer

A) the deficit minus government investment. 
B) the deficit plus net interest payments. 
C) the deficit minus current expenditures. 
D) the deficit minus depreciation. 
A) the deficit minus government investment. 
B) the deficit plus net interest payments. 
C) the deficit minus current expenditures. 
D) the deficit minus depreciation.

Question 3

Compared with other countries in the OECD,U.S.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 4

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

Accepted Answer

The Social Security system is in a crisi

Question 5

The primary deficit is equal to

Accepted Answer

A) the amount by which government purchases,transfers,and net interest exceed tax revenues. 
B) the amount by which government purchases and transfers exceed tax revenues. 
C) the deficit plus net interest payments. 
D) total tax revenues minus net interest minus government expenditures. 
A) the amount by which government purchases,transfers,and net interest exceed tax revenues. 
B) the amount by which government purchases and transfers exceed tax revenues. 
C) the deficit plus net interest payments. 
D) total tax revenues minus net interest minus government expenditures.

Question 6

The political process by which fiscal policy is made

Accepted Answer

A) is relatively rapid,contributing to the effectiveness of fiscal policy. 
B) requires only that the president approve changes to the budget,a decision that takes several months. 
C) is efficient in reaching a decision within a year. 
D) is slow and results in a long time lag for fiscal policy. 
A) is relatively rapid,contributing to the effectiveness of fiscal policy. 
B) requires only that the president approve changes to the budget,a decision that takes several months. 
C) is efficient in reaching a decision within a year. 
D) is slow and results in a long time lag for fiscal policy.

Question 7

An example of tax smoothing is provided by evidence of

Accepted Answer

A) temporary changes in defense expenditures by the government. 
B) reductions in tax rates prior to presidential elections. 
C) Keynesian tax cuts designed to help the economy recover from a recession. 
D) reliance on debt financing rather than taxation during World War II. 
A) temporary changes in defense expenditures by the government. 
B) reductions in tax rates prior to presidential elections. 
C) Keynesian tax cuts designed to help the economy recover from a recession. 
D) reliance on debt financing rather than taxation during World War II.

Question 8

An increase in the average tax rate,with the marginal 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

The primary current deficit is

Accepted Answer

A) current expenditures - tax revenues. 
B) current expenditures + transfers + net interest - tax revenues. 
C) current expenditures - net interest - tax revenues. 
D) current expenditures + transfers - tax revenues. 
A) current expenditures - tax revenues. 
B) current expenditures + transfers + net interest - tax revenues. 
C) current expenditures - net interest - tax revenues. 
D) current expenditures + transfers - tax revenues.

Question 10

Suppose that all workers place a value on their leisure of 75 goods per day.The production function relating output per day Y to the number of people working per day N is
Y = 500N - 0.4 N2,
and the marginal product of labor is
MPN = 500 - 0.8 N.
A 25% tax is levied on wages.
(a)How much is output per day?
(b)In terms of lost output,what is the cost of the distortion introduced by this tax?

Accepted Answer

The answer of Suppose that all workers place a value...

Question 11

The primary deficit is equal to

Accepted Answer

A) outlays - tax revenues. 
B) government purchases + transfers + net interest - tax revenues. 
C) outlays + net interest - tax revenues. 
D) government purchases + transfers - tax revenues. 
A) outlays - tax revenues. 
B) government purchases + transfers + net interest - tax revenues. 
C) outlays + net interest - tax revenues. 
D) government purchases + transfers - tax revenues.

Question 12

The revenue that a government raises by printing money is called

Accepted Answer

A) seignorage. 
B) monetary revenue. 
C) currency credit. 
D) currency inflation. 
A) seignorage. 
B) monetary revenue. 
C) currency credit. 
D) currency inflation.

Question 13

Net interest payments by the government are usually

Accepted Answer

A) small and sometimes negative for both the federal,and state and local governments. 
B) small and sometimes negative for the federal government,but large and positive for state and local governments. 
C) small and sometimes negative for state and local governments,but large and positive for the federal government. 
D) large and positive for both the federal,and state and local governments. 
A) small and sometimes negative for both the federal,and state and local governments. 
B) small and sometimes negative for the federal government,but large and positive for state and local governments. 
C) small and sometimes negative for state and local governments,but large and positive for the federal government. 
D) large and positive for both the federal,and state and local governments.

Question 14

Social Security benefits could be reduced in each of the following ways EXCEPT

Accepted Answer

A) cutting the promised monthly benefit. 
B) increasing the retirement age. 
C) investing the trust fund in the stock market. 
D) reducing the degree to which benefits are adjusted for inflation. 
A) cutting the promised monthly benefit. 
B) increasing the retirement age. 
C) investing the trust fund in the stock market. 
D) reducing the degree to which benefits are adjusted for inflation.

Question 15

How is real seignorage revenue related to inflation? How does the quantity of real seignorage revenue change as inflation rises from zero to a positive level,to still higher levels?

Accepted Answer

Real seignorage revenue is the inflation

Question 16

Because of automatic stabilizers,in recessions the government budget deficit ________,while in expansions the deficit ________.

Accepted Answer

A) falls; rises 
B) falls; falls 
C) rises; falls 
D) rises; rises 
A) falls; rises 
B) falls; falls 
C) rises; falls 
D) rises; rises

Question 17

The marginal tax rate is

Accepted Answer

A) the fraction of an additional dollar of income that must be paid in taxes. 
B) the total amount of taxes paid divided by after-tax income. 
C) the total amount of taxes paid divided by before-tax income. 
D) the average amount of government spending that is financed by taxes. 
A) the fraction of an additional dollar of income that must be paid in taxes. 
B) the total amount of taxes paid divided by after-tax income. 
C) the total amount of taxes paid divided by before-tax income. 
D) the average amount of government spending that is financed by taxes.

Question 18

Real money demand in the economy is given by
L = 0.5Y - 2500i,
Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

Accepted Answer

A) 0)05 
B) 0)075 
C) 0)09 
D) 0)10 
A) 0)05 
B) 0)075 
C) 0)09 
D) 0)10

Question 19

A decrease in the average tax rate,with the marginal 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 20

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

Accepted Answer

A) $383.33. 
B) $450.00. 
C) $640. 
D) $1562.50. 
A) $383.33. 
B) $450.00. 
C) $640. 
D) $1562.50.

The three main categories of government outlays are

The current deficit is

Compared with other countries in the OECD,U.S.government spending relative to GDP is

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

The primary deficit is equal to

The political process by which fiscal policy is made

An example of tax smoothing is provided by evidence of

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

The primary current deficit is

The primary deficit is equal to

The revenue that a government raises by printing money is called

Net interest payments by the government are usually

Social Security benefits could be reduced in each of the following ways EXCEPT

How is real seignorage revenue related to inflation? How does the quantity of real seignorage revenue change as inflation rises from zero to a positive level,to still higher levels?

Because of automatic stabilizers,in recessions the government budget deficit ,while in expansions the deficit .

The marginal tax rate is

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

A decrease in the average tax rate,with the marginal tax rate held constant,will

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

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

The three main categories of government outlays are

The current deficit is

Compared with other countries in the OECD,U.S.government spending relative to GDP is

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

The primary deficit is equal to

The political process by which fiscal policy is made

An example of tax smoothing is provided by evidence of

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

The primary current deficit is

The primary deficit is equal to

The revenue that a government raises by printing money is called

Net interest payments by the government are usually

Social Security benefits could be reduced in each of the following ways EXCEPT

How is real seignorage revenue related to inflation? How does the quantity of real seignorage revenue change as inflation rises from zero to a positive level,to still higher levels?

Because of automatic stabilizers,in recessions the government budget deficit ________,while in expansions the deficit ________.

The marginal tax rate is

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

A decrease in the average tax rate,with the marginal tax rate held constant,will

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

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

Because of automatic stabilizers,in recessions the government budget deficit ,while in expansions the deficit .