Question 1

If there is initially a federal budget surplus, and taxes fall while transfer payments rise:

Accepted Answer

A) there is an indeterminate effect on both AD and the budget surplus. 
B) AD increases and the budget surplus increases. 
C) AD increases and the budget surplus decreases. 
D) AD decreases and the budget surplus increases. 
E) AD decreases and the budget surplus decreases. 
A) there is an indeterminate effect on both AD and the budget surplus. 
B) AD increases and the budget surplus increases. 
C) AD increases and the budget surplus decreases. 
D) AD decreases and the budget surplus increases. 
E) AD decreases and the budget surplus decreases.

Question 2

If inflation was the most significant issue in the economy, an appropriate fiscal policy response would be to decrease taxation.

Accepted Answer

A) True 
 B)False

Question 3

A policy of a tax cut combined with increases in government purchases would shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following measures is associated with an expansionary fiscal policy?

Accepted Answer

A) lowering transfer payments 
B) lowering taxes 
C) lowering government purchases 
D) decreasing investments 
A) lowering transfer payments 
B) lowering taxes 
C) lowering government purchases 
D) decreasing investments

Question 5

AD will shift to the left, other things being equal, when:

Accepted Answer

A) the government budget surplus increases because government purchases fell. 
B) the government budget surplus increases because taxes rose. 
C) the government budget surplus increases because transfer payments fell. 
D) under any of the above circumstances. 
A) the government budget surplus increases because government purchases fell. 
B) the government budget surplus increases because taxes rose. 
C) the government budget surplus increases because transfer payments fell. 
D) under any of the above circumstances.

Question 6

An increase in government purchases combined with an increase in taxes would:

Accepted Answer

A) increase AD. 
B) decrease AD. 
C) leave AD unchanged. 
D) have an indeterminate effect on AD. 
A) increase AD. 
B) decrease AD. 
C) leave AD unchanged. 
D) have an indeterminate effect on AD.

Question 7

If there is initially a federal budget surplus, and taxes rise, while transfer payments fall:

Accepted Answer

A) AD increases and the budget surplus increases. 
B) AD increases and the budget surplus decreases. 
C) AD decreases and the budget surplus increases. 
D) AD decreases and the budget surplus decreases. 
E) there is an indeterminate effect on both AD and the budget deficit. 
A) AD increases and the budget surplus increases. 
B) AD increases and the budget surplus decreases. 
C) AD decreases and the budget surplus increases. 
D) AD decreases and the budget surplus decreases. 
E) there is an indeterminate effect on both AD and the budget deficit.

Question 8

Historically, the largest budget deficits and a growing government debt occur during war years.

Accepted Answer

A) True 
 B)False

Question 9

If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?

Accepted Answer

If inflation is the major issue, the cor

Question 10

Contractionary fiscal policy consists of:

Accepted Answer

A) increased government purchases, increased taxes, increased transfer payments. 
B) decreased government purchases, decreased taxes, decreased transfer payments. 
C) decreased government purchases, increased taxes, decreased transfer payments. 
D) increased government purchases, decreased taxes, increased transfer payments. 
A) increased government purchases, increased taxes, increased transfer payments. 
B) decreased government purchases, decreased taxes, decreased transfer payments. 
C) decreased government purchases, increased taxes, decreased transfer payments. 
D) increased government purchases, decreased taxes, increased transfer payments.

Question 11

The largest single source of revenue for the federal government is the:

Accepted Answer

A) corporate income tax. 
B) federal excise tax. 
C) personal income tax. 
D) Social Security tax. 
A) corporate income tax. 
B) federal excise tax. 
C) personal income tax. 
D) Social Security tax.

Question 12

If the MPC is 2/3, 2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

Accepted Answer

A) True 
 B)False

Question 13

If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?

Accepted Answer

A) Increase consumption taxes. 
B) Increase government purchases of goods and services. 
C) Reduce transfer payments. 
D) Increase the budget deficit. 
A) Increase consumption taxes. 
B) Increase government purchases of goods and services. 
C) Reduce transfer payments. 
D) Increase the budget deficit.

Question 14

A combination of an increase in investment and a decrease in exports would:

Accepted Answer

A) increase AD. 
B) decrease AD. 
C) leave AD unchanged. 
D) have an indeterminate effect on AD. 
A) increase AD. 
B) decrease AD. 
C) leave AD unchanged. 
D) have an indeterminate effect on AD.

Question 15

If there is initially a federal budget deficit, and taxes rise, while transfer payments fall:

Accepted Answer

A) AD increases and the budget deficit increases. 
B) AD increases and the budget deficit decreases. 
C) AD decreases and the budget deficit increases. 
D) AD decreases and the budget deficit decreases. 
E) there is an indeterminate effect on both AD and the budget deficit. 
A) AD increases and the budget deficit increases. 
B) AD increases and the budget deficit decreases. 
C) AD decreases and the budget deficit increases. 
D) AD decreases and the budget deficit decreases. 
E) there is an indeterminate effect on both AD and the budget deficit.

Question 16

A decrease in transfer payments would not do which of the following in the short run?

Accepted Answer

A) decrease any budget deficit or increase any budget surplus 
B) reduce the price level 
C) reduce unemployment 
D) reduce consumption purchases 
A) decrease any budget deficit or increase any budget surplus 
B) reduce the price level 
C) reduce unemployment 
D) reduce consumption purchases

Question 17

If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?

Accepted Answer

A) decrease taxes 
B) decrease transfer payments 
C) increase government purchases 
D) all of the above 
E) both A and C above 
A) decrease taxes 
B) decrease transfer payments 
C) increase government purchases 
D) all of the above 
E) both A and C above

Question 18

The multiplier will be smaller, other things being equal:

Accepted Answer

A) the smaller the fraction of each dollar earned that goes to taxes. 
B) the larger the fraction of each dollar of disposable income that is spent on imports. 
C) the smaller the fraction of each dollar of disposable income that goes to saving. 
D) All of these answers are true. 
A) the smaller the fraction of each dollar earned that goes to taxes. 
B) the larger the fraction of each dollar of disposable income that is spent on imports. 
C) the smaller the fraction of each dollar of disposable income that goes to saving. 
D) All of these answers are true.

Question 19

If there is initially a federal budget deficit, and government purchases and taxes both rise:

Accepted Answer

A) AD increases and the budget deficit increases. 
B) AD increases and the budget deficit decreases. 
C) AD decreases and the budget deficit increases. 
D) AD decreases and the budget deficit decreases. 
E) there is an indeterminate effect on both AD and the budget deficit. 
A) AD increases and the budget deficit increases. 
B) AD increases and the budget deficit decreases. 
C) AD decreases and the budget deficit increases. 
D) AD decreases and the budget deficit decreases. 
E) there is an indeterminate effect on both AD and the budget deficit.

Question 20

A substantial cut in marginal tax rates would:

Accepted Answer

A) increase real GDP in the short run and the long run. 
B) increase real GDP in the short run but not the long run. 
C) increase the price level. 
D) decrease the price level. 
A) increase real GDP in the short run and the long run. 
B) increase real GDP in the short run but not the long run. 
C) increase the price level. 
D) decrease the price level.

If there is initially a federal budget surplus, and taxes fall while transfer payments rise:

If inflation was the most significant issue in the economy, an appropriate fiscal policy response would be to decrease taxation.

A policy of a tax cut combined with increases in government purchases would shift the aggregate demand curve to the left.

Which of the following measures is associated with an expansionary fiscal policy?

AD will shift to the left, other things being equal, when:

An increase in government purchases combined with an increase in taxes would:

If there is initially a federal budget surplus, and taxes rise, while transfer payments fall:

Historically, the largest budget deficits and a growing government debt occur during war years.

If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?

Contractionary fiscal policy consists of:

The largest single source of revenue for the federal government is the:

If the MPC is 2/3, 2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?

A combination of an increase in investment and a decrease in exports would:

If there is initially a federal budget deficit, and taxes rise, while transfer payments fall:

A decrease in transfer payments would not do which of the following in the short run?

If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?

The multiplier will be smaller, other things being equal:

If there is initially a federal budget deficit, and government purchases and taxes both rise:

A substantial cut in marginal tax rates would:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

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Exam 14: Fiscal Policy

If there is initially a federal budget surplus, and taxes fall while transfer payments rise:

If inflation was the most significant issue in the economy, an appropriate fiscal policy response would be to decrease taxation.

A policy of a tax cut combined with increases in government purchases would shift the aggregate demand curve to the left.

Which of the following measures is associated with an expansionary fiscal policy?

AD will shift to the left, other things being equal, when:

An increase in government purchases combined with an increase in taxes would:

If there is initially a federal budget surplus, and taxes rise, while transfer payments fall:

Historically, the largest budget deficits and a growing government debt occur during war years.

If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?

Contractionary fiscal policy consists of:

The largest single source of revenue for the federal government is the:

If the MPC is 2/3, 2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?

A combination of an increase in investment and a decrease in exports would:

If there is initially a federal budget deficit, and taxes rise, while transfer payments fall:

A decrease in transfer payments would not do which of the following in the short run?

If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?

The multiplier will be smaller, other things being equal:

If there is initially a federal budget deficit, and government purchases and taxes both rise:

A substantial cut in marginal tax rates would:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters