Question 1

The time span between the beginning of a downturn and the time by which hard data to indicate a downturn is made available is called:

Accepted Answer

A) ​the signal lag. 
B) ​the implementation lag. 
C) ​the impact lag. 
D) ​the recognition lag. 
A) ​the signal lag. 
B) ​the implementation lag. 
C) ​the impact lag. 
D) ​the recognition lag.

Question 2

Other things constant, what is the outcome of expansionary fiscal policies on employment, inflation, real output, and deficits in the short-run?

Accepted Answer

The expansionary policy will lead to an

Question 3

Will the national debt have to be paid off (i E., reduced to zero) in the future?

Accepted Answer

A) ​No, it can continually be refinanced. 
B) ​Yes, if it is not paid off, the U.S.Treasury will have to file for bankruptcy. 
C) ​No, technically, it is not a contractual obligation of the federal government. 
D) ​Yes, but since most of the debt is held by Federal Reserve Bank, its re-payment would merely involve an accounting transaction between the Fed and the Treasury. 
A) ​No, it can continually be refinanced. 
B) ​Yes, if it is not paid off, the U.S.Treasury will have to file for bankruptcy. 
C) ​No, technically, it is not a contractual obligation of the federal government. 
D) ​Yes, but since most of the debt is held by Federal Reserve Bank, its re-payment would merely involve an accounting transaction between the Fed and the Treasury.

Question 4

If the government sought to end a recession, which of the following would be an appropriate policy?

Accepted Answer

A) ​Increase taxes. 
B) ​Decrease government purchases. 
C) ​Decrease taxes and increase government purchases. 
D) ​None of the above 
A) ​Increase taxes. 
B) ​Decrease government purchases. 
C) ​Decrease taxes and increase government purchases. 
D) ​None of the above

Question 5

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) ​Decrease government purchases. 
D) ​None of the above. 
A) ​Increase consumption taxes. 
B) ​Increase government purchases of goods and services. 
C) ​Decrease government purchases. 
D) ​None of the above.

Question 6

Typically, the budget deficit is financed by simply printing money.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) ​lowering consumption 
B) ​lowering taxes 
C) ​lowering government purchases 
D) ​decreasing investments 
A) ​lowering consumption 
B) ​lowering taxes 
C) ​lowering government purchases 
D) ​decreasing investments

Question 8

The extent of the multiplier effect visible within a short time will be ____ the total effect indicated by the multiplier formula.

Accepted Answer

A) ​significantly higher than 
B) ​equal to 
C) ​less than 
D) ​slightly higher than 
A) ​significantly higher than 
B) ​equal to 
C) ​less than 
D) ​slightly higher than

Question 9

What is the impact of a $10 billion tax cut on consumer spending, if MPC is equal to 0.8?

Accepted Answer

A) ​$50 billion 
B) ​$40 billion 
C) ​$10 billion 
D) ​$20 billion 
A) ​$50 billion 
B) ​$40 billion 
C) ​$10 billion 
D) ​$20 billion

Question 10

If government purchases exceed tax revenue, there is a budget deficit.

Accepted Answer

A) True 
 B)False

Question 11

During a boom expansionary economy, public assistance payments and unemployment compensation payments automatically decrease while income taxes automatically increase. Which of the following best describes the effect of these changes on aggregate demand?

Accepted Answer

A) ​Aggregate demand will be less than it would be without these automatic stabilizers. 
B) ​Aggregate demand will be the same as it was before the expansion. 
C) ​Aggregate demand will be less than it was before the expansion. 
D) ​none of the above 
A) ​Aggregate demand will be less than it would be without these automatic stabilizers. 
B) ​Aggregate demand will be the same as it was before the expansion. 
C) ​Aggregate demand will be less than it was before the expansion. 
D) ​none of the above

Question 12

If MPC = 0.8, a $200 billion increase in government purchases would have what size effect on the "first round" of induced added consumption, and what total effect on AD?

Accepted Answer

A) ​increase "first round" consumption by $80 billion; increase AD by $400 billion 
B) ​increase "first round" consumption by $160 billion; increase AD by $1 trillion 
C) ​increase "first round" consumption by $200 billion; increase AD by $1 trillion 
D) ​increase "first round" consumption by $800 billion; increase AD by $4 trillion 
A) ​increase "first round" consumption by $80 billion; increase AD by $400 billion 
B) ​increase "first round" consumption by $160 billion; increase AD by $1 trillion 
C) ​increase "first round" consumption by $200 billion; increase AD by $1 trillion 
D) ​increase "first round" consumption by $800 billion; increase AD by $4 trillion

Question 13

If there is initially a federal budget deficit, and government purchases and transfer payments 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. 
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.

Question 14

Which of the following is false?

Accepted Answer

A) ​Expansionary fiscal policy will tend to cause net exports to fall. 
B) ​The larger the crowding out effect, the smaller the actual effect of a given change in fiscal policy. 
C) ​The crowding out effect does not occur with a tax change. 
D) ​Starting from an initial recession equilibrium, expansionary fiscal policy could potentially increase employment to the full employment level. 
A) ​Expansionary fiscal policy will tend to cause net exports to fall. 
B) ​The larger the crowding out effect, the smaller the actual effect of a given change in fiscal policy. 
C) ​The crowding out effect does not occur with a tax change. 
D) ​Starting from an initial recession equilibrium, expansionary fiscal policy could potentially increase employment to the full employment level.

Question 15

Each additional round of the multiplier process will tend to be larger:

Accepted Answer

A) ​the smaller the MPC. 
B) ​the greater the rate of income taxation. 
C) ​the less people save from increases in their incomes. 
D) ​the larger the fraction of each dollar of domestic income spent on imported goods. 
E) ​in each of the above cases. 
A) ​the smaller the MPC. 
B) ​the greater the rate of income taxation. 
C) ​the less people save from increases in their incomes. 
D) ​the larger the fraction of each dollar of domestic income spent on imported goods. 
E) ​in each of the above cases.

Question 16

To achieve a $500 billion increase in AD, if the MPC is 0.8, what increase in government purchases would be called for?

Accepted Answer

A) ​$625 billion 
B) ​$500 billion 
C) ​$400 billion 
D) ​$100 billion 
A) ​$625 billion 
B) ​$500 billion 
C) ​$400 billion 
D) ​$100 billion

Question 17

Which of the following tax changes would a supply-side economist be most likely to favor?

Accepted Answer

A) ​eliminating an investment tax credit 
B) ​an increase in the capital gain tax 
C) ​lower marginal income tax rates 
D) ​an increase in the personal income tax rate for high-income individuals 
A) ​eliminating an investment tax credit 
B) ​an increase in the capital gain tax 
C) ​lower marginal income tax rates 
D) ​an increase in the personal income tax rate for high-income individuals

Question 18

To offset the effect of a steep rise in net exports on the economy, the government might:

Accepted Answer

A) ​increase government purchases. 
B) ​decrease government purchases. 
C) ​increase taxes. 
D) ​both (b) and (c) above 
A) ​increase government purchases. 
B) ​decrease government purchases. 
C) ​increase taxes. 
D) ​both (b) and (c) above

Question 19

The impact of an increase in government purchases may be smaller than first assumed (in the crowding out effect) because:

Accepted Answer

A) ​As the new spending takes place, income and real GDP will rise which will cause households and firms to increase their demand for money to accommodate increased buying and selling. 
B) ​The increase in the demand for money will cause the interest rate to rise. 
C) ​As a result of the higher interest rate, consumers may decide against buying a car, a home, or other interest sensitive goods, and businesses may cancel or scale back plans to expand or buy new capital equipment. 
D) ​All of the above 
A) ​As the new spending takes place, income and real GDP will rise which will cause households and firms to increase their demand for money to accommodate increased buying and selling. 
B) ​The increase in the demand for money will cause the interest rate to rise. 
C) ​As a result of the higher interest rate, consumers may decide against buying a car, a home, or other interest sensitive goods, and businesses may cancel or scale back plans to expand or buy new capital equipment. 
D) ​All of the above

Question 20

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 MPC. 
C) ​the smaller the fraction of each dollar of disposable income that goes to saving. 
D) ​None of the above are true. 
A) ​the smaller the fraction of each dollar earned that goes to taxes. 
B) ​the larger the MPC. 
C) ​the smaller the fraction of each dollar of disposable income that goes to saving. 
D) ​None of the above are true.

Exam 16: The Markets for Labor, Capital, and Land

The time span between the beginning of a downturn and the time by which hard data to indicate a downturn is made available is called:

Other things constant, what is the outcome of expansionary fiscal policies on employment, inflation, real output, and deficits in the short-run?

Will the national debt have to be paid off (i E., reduced to zero) in the future?

If the government sought to end a recession, which of the following would be an appropriate policy?

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?

Typically, the budget deficit is financed by simply printing money.

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

The extent of the multiplier effect visible within a short time will be ____ the total effect indicated by the multiplier formula.

What is the impact of a $10 billion tax cut on consumer spending, if MPC is equal to 0.8?

If government purchases exceed tax revenue, there is a budget deficit.

During a boom expansionary economy, public assistance payments and unemployment compensation payments automatically decrease while income taxes automatically increase. Which of the following best describes the effect of these changes on aggregate demand?

If MPC = 0.8, a $200 billion increase in government purchases would have what size effect on the "first round" of induced added consumption, and what total effect on AD?

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

Which of the following is false?

Each additional round of the multiplier process will tend to be larger:

To achieve a $500 billion increase in AD, if the MPC is 0.8, what increase in government purchases would be called for?

Which of the following tax changes would a supply-side economist be most likely to favor?

To offset the effect of a steep rise in net exports on the economy, the government might:

The impact of an increase in government purchases may be smaller than first assumed (in the crowding out effect) because:

The multiplier will be smaller, other things being equal:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

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