Question 1

Discretionary fiscal policy refers to changes in taxes or spending that occur in response to changes in the economy.

Accepted Answer

A) True 
 B)False

Question 2

In a recession the U.S. federal government deficit automatically falls.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Table 9.8 below to answer the questions that follow.
Table 9.8
All Figures in Billions of Dollars
  
-Refer to Table 9.8. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Accepted Answer

A)  $4,050 billion. 
B)  $3,850 billion. 
C)  $2,100 billion. 
D)  $1,600 billion. 
A)  $4,050 billion. 
B)  $3,850 billion. 
C)  $2,100 billion. 
D)  $1,600 billion.

Question 4

Assume that taxes depend on income. The MPC is 0.8 and t is 0.25. The government spending multiplier is

Accepted Answer

A)  1.67. 
B)  2.5. 
C)  5. 
D)  10. 
A)  1.67. 
B)  2.5. 
C)  5. 
D)  10.

Question 5

Government spending increases by $40 billion and the equilibrium level of output increases by $200 billion. The government spending multiplier

Accepted Answer

A)  is 4. 
B)  is 5. 
C)  is 6. 
D)  cannot be determined from this information, because the MPC is not given. 
A)  is 4. 
B)  is 5. 
C)  is 6. 
D)  cannot be determined from this information, because the MPC is not given.

Question 6

Refer to the information provided in Table 9.7 below to answer the questions that follow.
Table 9.7
All Numbers are in $ Million  
-Refer to Table 9.7. Suppose the economy is in equilibrium and the government increases spending by $100 million, the new equilibrium output is $________ million

Accepted Answer

A)  1,600 
B)  1,800 
C)  1,900 
D)  2,400 
A)  1,600 
B)  1,800 
C)  1,900 
D)  2,400

Question 7

Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3  
-Refer to Table 9.3. At the equilibrium level of income, leakages equal ________ billion.

Accepted Answer

A)  $0 
B)  $200 
C)  $400 
D)  $600 
A)  $0 
B)  $200 
C)  $400 
D)  $600

Question 8

Fiscal policy refers to

Accepted Answer

A)  the techniques used by a business firm to reduce its tax liability. 
B)  the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply. 
C)  the spending and taxing policies used by the government to influence the economy. 
D)  the government's ability to regulate a firm's behavior in the financial markets. 
A)  the techniques used by a business firm to reduce its tax liability. 
B)  the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply. 
C)  the spending and taxing policies used by the government to influence the economy. 
D)  the government's ability to regulate a firm's behavior in the financial markets.

Question 9

If taxes are a function of income, then the AE function is

Accepted Answer

A)  flatter than if taxes are a lump-sum amount. 
B)  steeper than if taxes are a lump-sum amount. 
C)  vertical. 
D)  downward sloping. 
A)  flatter than if taxes are a lump-sum amount. 
B)  steeper than if taxes are a lump-sum amount. 
C)  vertical. 
D)  downward sloping.

Question 10

Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2  
-Refer to Table 9.2. At an output level of $1,500, disposable income

Accepted Answer

A)  is $1,000. 
B)  is $1,200. 
C)  is $1,400. 
D)  cannot be determined from this information. 
A)  is $1,000. 
B)  is $1,200. 
C)  is $1,400. 
D)  cannot be determined from this information.

Question 11

The Norwegian economy can be characterized by Equation 9.3.
EQUATION 9.3:
C = 100 + 0.8Yd
G = 500
T = 200
I = 200
-Refer to Equation 9.3. At the equilibrium level of output in Norway, consumption equals

Accepted Answer

A)  2,220. 
B)  2,500. 
C)  3,140. 
D)  3,300. 
A)  2,220. 
B)  2,500. 
C)  3,140. 
D)  3,300.

Question 12

Refer to the information provided in Figure 9.4 below to answer the questions that follow.   Figure 9.4
-Refer to Figure 9.4. Along AE1, ________ when aggregate output equals $2,000 billion.

Accepted Answer

A) leakages > injections B) leakages < injections C) leakages = zero D) leakages = injections A) leakages > injections B) leakages < injections C) leakages = zero D) leakages = injections

Question 13

Refer to the information provided in Figure 9.4 below to answer the questions that follow.   Figure 9.4
-Refer to Figure 9.4. Along aggregate expenditure AE1, the MPS will be

Accepted Answer

A)  0.4. 
B)  0.3. 
C)  0.2. 
D)  0.1. 
A)  0.4. 
B)  0.3. 
C)  0.2. 
D)  0.1.

Question 14

The formula for the tax multiplier is

Accepted Answer

A)  -(MPS/MP
C) . 
B)  MPS/MPC. 
C)  -(MPC/MPS). 
D)  -1/MPS. 
A)  -(MPS/MP
C) . 
B)  MPS/MPC. 
C)  -(MPC/MPS). 
D)  -1/MPS.

Question 15

Assume that taxes depend on income and the MPC is 0.6 and t is 0.3. An increase in taxes of $10 billion will decrease equilibrium income by

Accepted Answer

A)  $10.3 billion. 
B)  $17.2 billion. 
C)  $20.0 billion. 
D)  $22.4 billion. 
A)  $10.3 billion. 
B)  $17.2 billion. 
C)  $20.0 billion. 
D)  $22.4 billion.

Question 16

If the government wants to reduce unemployment, government purchases should be ________ and/or taxes should be ________.

Accepted Answer

A)  increased; increased 
B)  decreased; decreased 
C)  decreased; increased 
D)  increased; decreased 
A)  increased; increased 
B)  decreased; decreased 
C)  decreased; increased 
D)  increased; decreased

Question 17

You are hired by the Bureau of Economic Analogies (BEA) as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $200 billion. The best estimate he has for the MPC is 0.6. Which of the following policies should you recommend?

Accepted Answer

A)  increase government spending by $80 billion 
B)  increase taxes by $133.33 billion 
C)  reduce taxes by $150 billion and decrease government spending by $100 billion 
D)  reduce the budget deficit by $200 billion 
A)  increase government spending by $80 billion 
B)  increase taxes by $133.33 billion 
C)  reduce taxes by $150 billion and decrease government spending by $100 billion 
D)  reduce the budget deficit by $200 billion

Question 18

Refer to the information provided in Table 9.5 below to answer the questions that follow.
Table 9.5
All Numbers are in $ Million  
-Refer to Table 9.5. Which of the following variables is not considered autonomous?

Accepted Answer

A)  saving 
B)  planned investment 
C)  planned government spending 
D)  none of the above 
A)  saving 
B)  planned investment 
C)  planned government spending 
D)  none of the above

Question 19

Refer to the information provided in Figure 9.5 below to answer the questions that follow.   Figure 9.5
-Refer to Figure 9.5. If the economy is in equilibrium and the government decreases spending by $200 billion, equilibrium aggregate output decreases to $________ billion.

Accepted Answer

A)  1,400 
B)  1,200 
C)  1,000 
D)  800 
A)  1,400 
B)  1,200 
C)  1,000 
D)  800

Question 20

The average tax rate steadily increased during the 2001-2008 Bush administrations.

Accepted Answer

A) True 
 B)False

Discretionary fiscal policy refers to changes in taxes or spending that occur in response to changes in the economy.

In a recession the U.S. federal government deficit automatically falls.

Refer to the information provided in Table 9.8 below to answer the questions that follow. Table 9.8 All Figures in Billions of Dollars -Refer to Table 9.8. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Assume that taxes depend on income. The MPC is 0.8 and t is 0.25. The government spending multiplier is

Government spending increases by $40 billion and the equilibrium level of output increases by $200 billion. The government spending multiplier

Refer to the information provided in Table 9.7 below to answer the questions that follow. Table 9.7 All Numbers are in $ Million -Refer to Table 9.7. Suppose the economy is in equilibrium and the government increases spending by $100 million, the new equilibrium output is $________ million

Refer to the information provided in Table 9.3 below to answer the questions that follow. Table 9.3 -Refer to Table 9.3. At the equilibrium level of income, leakages equal ________ billion.

Fiscal policy refers to

If taxes are a function of income, then the AE function is

Refer to the information provided in Table 9.2 below to answer the questions that follow. Table 9.2 -Refer to Table 9.2. At an output level of $1,500, disposable income

The Norwegian economy can be characterized by Equation 9.3. EQUATION 9.3: C = 100 + 0.8Yd G = 500 T = 200 I = 200 -Refer to Equation 9.3. At the equilibrium level of output in Norway, consumption equals

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along AE₁, ________ when aggregate output equals $2,000 billion.

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along aggregate expenditure AE₁, the MPS will be

The formula for the tax multiplier is

Assume that taxes depend on income and the MPC is 0.6 and t is 0.3. An increase in taxes of $10 billion will decrease equilibrium income by

If the government wants to reduce unemployment, government purchases should be and/or taxes should be .

Refer to the information provided in Table 9.5 below to answer the questions that follow. Table 9.5 All Numbers are in $ Million -Refer to Table 9.5. Which of the following variables is not considered autonomous?

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. If the economy is in equilibrium and the government decreases spending by $200 billion, equilibrium aggregate output decreases to $________ billion.

The average tax rate steadily increased during the 2001-2008 Bush administrations.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 9: The Government and Fiscal Policy

Discretionary fiscal policy refers to changes in taxes or spending that occur in response to changes in the economy.

In a recession the U.S. federal government deficit automatically falls.

Refer to the information provided in Table 9.8 below to answer the questions that follow. Table 9.8 All Figures in Billions of Dollars -Refer to Table 9.8. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Assume that taxes depend on income. The MPC is 0.8 and t is 0.25. The government spending multiplier is

Government spending increases by $40 billion and the equilibrium level of output increases by $200 billion. The government spending multiplier

Refer to the information provided in Table 9.7 below to answer the questions that follow. Table 9.7 All Numbers are in $ Million -Refer to Table 9.7. Suppose the economy is in equilibrium and the government increases spending by $100 million, the new equilibrium output is $________ million

Refer to the information provided in Table 9.3 below to answer the questions that follow. Table 9.3 -Refer to Table 9.3. At the equilibrium level of income, leakages equal ________ billion.

Fiscal policy refers to

If taxes are a function of income, then the AE function is

Refer to the information provided in Table 9.2 below to answer the questions that follow. Table 9.2 -Refer to Table 9.2. At an output level of $1,500, disposable income

The Norwegian economy can be characterized by Equation 9.3. EQUATION 9.3: C = 100 + 0.8Yd G = 500 T = 200 I = 200 -Refer to Equation 9.3. At the equilibrium level of output in Norway, consumption equals

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along AE1, ________ when aggregate output equals $2,000 billion.

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along aggregate expenditure AE1, the MPS will be

The formula for the tax multiplier is

Assume that taxes depend on income and the MPC is 0.6 and t is 0.3. An increase in taxes of $10 billion will decrease equilibrium income by

If the government wants to reduce unemployment, government purchases should be ________ and/or taxes should be ________.

Refer to the information provided in Table 9.5 below to answer the questions that follow. Table 9.5 All Numbers are in $ Million -Refer to Table 9.5. Which of the following variables is not considered autonomous?

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. If the economy is in equilibrium and the government decreases spending by $200 billion, equilibrium aggregate output decreases to $________ billion.

The average tax rate steadily increased during the 2001-2008 Bush administrations.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along AE₁, ________ when aggregate output equals $2,000 billion.

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. Along aggregate expenditure AE₁, the MPS will be

If the government wants to reduce unemployment, government purchases should be and/or taxes should be .