Question 1

Which of the following can be categorized under fiscal policy?

Accepted Answer

A) Increase in money supply 
B) Decrease in money supply 
C) Increase in federal funds rate 
D) Decrease in reserve requirement 
E) Increase in tax rates 
A) Increase in money supply 
B) Decrease in money supply 
C) Increase in federal funds rate 
D) Decrease in reserve requirement 
E) Increase in tax rates E

Question 2

_____ are elements of fiscal policy that automatically change in value as national income changes.

Accepted Answer

A) Statistical discrepancies 
B) Exchange rates 
C) Budget deficits 
D) Automatic stabilizers 
E) Supply-side shocks 
A) Statistical discrepancies 
B) Exchange rates 
C) Budget deficits 
D) Automatic stabilizers 
E) Supply-side shocks D

Question 3

A progressive tax system is one in which the tax rate actually increases as income rises.

Accepted Answer

A) True 
 B)False  True

Question 4

Empirical evidence suggests that the United States ran close to a balanced budget during the World War II.

Accepted Answer

A) True 
 B)False

Question 5

Assume an economy has automatic stabilizers in place that include a progressive tax structure and a transfer payment system.Then in a period of high economic growth and high inflation, we would expect:

Accepted Answer

A) tax revenues to fall and unemployment compensation to rise. 
B) average tax rates and welfare payments to decline. 
C) the national debt to become larger. 
D) average tax rates and government revenues to rise. 
E) government spending on social security benefits to rise. 
A) tax revenues to fall and unemployment compensation to rise. 
B) average tax rates and welfare payments to decline. 
C) the national debt to become larger. 
D) average tax rates and government revenues to rise. 
E) government spending on social security benefits to rise.

Question 6

Increased domestic imports and higher international trade deficits are possible results of government surpluses.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following trends has been observed in federal revenues and expenditures over time?

Accepted Answer

A) Expenditures were lower than the revenues in the 1998-2001 period. 
B) Expenditures were lower than the revenues in the 1930s. 
C) Expenditures were higher than the revenues in the 1998-2001 period. 
D) Expenditures were more less equal to the revenues in the 1930s. 
E) Expenditures were more or less equal to the revenues in the 1998-2001 period. 
A) Expenditures were lower than the revenues in the 1998-2001 period. 
B) Expenditures were lower than the revenues in the 1930s. 
C) Expenditures were higher than the revenues in the 1998-2001 period. 
D) Expenditures were more less equal to the revenues in the 1930s. 
E) Expenditures were more or less equal to the revenues in the 1998-2001 period.

Question 8

If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more than indicated by the government spending multiplier.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following taxes are more easier to collect in industrial countries than in developing countries?

Accepted Answer

A) Sales tax 
B) Capital gains tax 
C) Personal income tax 
D) Business tax 
E) Export tax 
A) Sales tax 
B) Capital gains tax 
C) Personal income tax 
D) Business tax 
E) Export tax

Question 10

National debt can be defined as:

Accepted Answer

A) the total money supply in the economy. 
B) the total stock of government bonds outstanding. 
C) the difference between real GDP and potential GDP. 
D) the change in fiscal deficit that results from an increase in government spending. 
E) the total volume of private investment in the country. 
A) the total money supply in the economy. 
B) the total stock of government bonds outstanding. 
C) the difference between real GDP and potential GDP. 
D) the change in fiscal deficit that results from an increase in government spending. 
E) the total volume of private investment in the country.

Question 11

Under a progressive tax system:

Accepted Answer

A) the average tax rate increases with increases in real GDP. 
B) the average tax rate remains constant with changes in real GDP. 
C) the average tax rate falls with increases in real GDP. 
D) government tax receipts increase when the economy is in a recession. 
E) government tax receipts decrease when the economy is expanding. 
A) the average tax rate increases with increases in real GDP. 
B) the average tax rate remains constant with changes in real GDP. 
C) the average tax rate falls with increases in real GDP. 
D) government tax receipts increase when the economy is in a recession. 
E) government tax receipts decrease when the economy is expanding.

Question 12

Higher taxes affect real GDP indirectly through both the consumption channel and the output supply channel.

Accepted Answer

A) True 
 B)False

Question 13

A(n)_____ is an indirect tax imposed on each sale at each stage of production.

Accepted Answer

A) personal tax 
B) value-added tax 
C) excise duty 
D) sales tax 
E) ad-valorem tax 
A) personal tax 
B) value-added tax 
C) excise duty 
D) sales tax 
E) ad-valorem tax

Question 14

Suppose the real interest rate in the economy is 3% and the nominal interest rate is 6%, what is the current inflation rate?

Accepted Answer

A) 18% 
B) 9% 
C) 2% 
D) 3% 
E) 2.5% 
A) 18% 
B) 9% 
C) 2% 
D) 3% 
E) 2.5%

Question 15

A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments.

Accepted Answer

A) True 
 B)False

Question 16

The figure given below depicts the tax revenue for different tax rates applied by the government. Figure 11.2   Which of the following is depicted in Figure 11.2?

Accepted Answer

A) The Lorenz curve 
B) The community indifference curve 
C) The aggregate labor supply curve 
D) The Laffer curve 
E) The Engel curve 
A) The Lorenz curve 
B) The community indifference curve 
C) The aggregate labor supply curve 
D) The Laffer curve 
E) The Engel curve

Question 17

Ceteris paribus, if the U.S.federal government reduces fiscal spending which of the following will be observed?

Accepted Answer

A) The aggregate demand curve will shift to the right. 
B) The aggregate expenditure in the economy will decrease. 
C) The economy will approach potential GDP. 
D) The marginal propensity to consume will increase. 
E) The average price level will increase. 
A) The aggregate demand curve will shift to the right. 
B) The aggregate expenditure in the economy will decrease. 
C) The economy will approach potential GDP. 
D) The marginal propensity to consume will increase. 
E) The average price level will increase.

Question 18

Which of the following is an example of a transfer payment by the government?

Accepted Answer

A) The government provides unemployment benefits to its citizens 
B) The local government invests in building a community center. 
C) The government raises funds in order to build bridges and roads. 
D) The government provides healthcare to its citizens at a subsidized price. 
E) The government provides concessional rates to senior citizens who use public transport. 
A) The government provides unemployment benefits to its citizens 
B) The local government invests in building a community center. 
C) The government raises funds in order to build bridges and roads. 
D) The government provides healthcare to its citizens at a subsidized price. 
E) The government provides concessional rates to senior citizens who use public transport.

Question 19

Critics of the supply-side tax cuts proposed by the Reagan administration argued that lower taxes would:

Accepted Answer

A) increase the budget deficit. 
B) decrease money supply in the economy. 
C) reduce the aggregate price level. 
D) reduce the disposable income of households. 
E) reduce the volume of international trade. 
A) increase the budget deficit. 
B) decrease money supply in the economy. 
C) reduce the aggregate price level. 
D) reduce the disposable income of households. 
E) reduce the volume of international trade.

Question 20

A drop in consumption or investment spending caused by increased government spending is referred to as:

Accepted Answer

A) the multiplier effect. 
B) an expansionary gap. 
C) the Ricardian equivalence. 
D) the paradox of thrift. 
E) the crowding out. 
A) the multiplier effect. 
B) an expansionary gap. 
C) the Ricardian equivalence. 
D) the paradox of thrift. 
E) the crowding out.

Exam 17: Fiscal Policy

Which of the following can be categorized under fiscal policy?

_____ are elements of fiscal policy that automatically change in value as national income changes.

A progressive tax system is one in which the tax rate actually increases as income rises.

Empirical evidence suggests that the United States ran close to a balanced budget during the World War II.

Assume an economy has automatic stabilizers in place that include a progressive tax structure and a transfer payment system.Then in a period of high economic growth and high inflation, we would expect:

Increased domestic imports and higher international trade deficits are possible results of government surpluses.

Which of the following trends has been observed in federal revenues and expenditures over time?

If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more than indicated by the government spending multiplier.

Which of the following taxes are more easier to collect in industrial countries than in developing countries?

National debt can be defined as:

Under a progressive tax system:

Higher taxes affect real GDP indirectly through both the consumption channel and the output supply channel.

A(n)_____ is an indirect tax imposed on each sale at each stage of production.

Suppose the real interest rate in the economy is 3% and the nominal interest rate is 6%, what is the current inflation rate?

A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments.

The figure given below depicts the tax revenue for different tax rates applied by the government. Figure 11.2 Which of the following is depicted in Figure 11.2?

Ceteris paribus, if the U.S.federal government reduces fiscal spending which of the following will be observed?

Which of the following is an example of a transfer payment by the government?

Critics of the supply-side tax cuts proposed by the Reagan administration argued that lower taxes would:

A drop in consumption or investment spending caused by increased government spending is referred to as:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters