Question 1

The aggregate consumption function is C = 800 + 0.8Yd. If income is $2,000 and net taxes are $500, consumption equals

Accepted Answer

A)  1,500. 
B)  2,000. 
C)  2,050. 
D)  2,150. 
A)  1,500. 
B)  2,000. 
C)  2,050. 
D)  2,150.

Question 2

When the government sector is included in the income-expenditure model, the equation for aggregate income is

Accepted Answer

A)  Y = C + S - T. 
B)  Y = C + I. 
C)  Y = C + I + G. 
D)  Y = C + S + I. 
A)  Y = C + S - T. 
B)  Y = C + I. 
C)  Y = C + I + G. 
D)  Y = C + S + I.

Question 3

Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1  
-Refer to Table 9.1. At an output level of $1,200 billion, the level of aggregate expenditure is

Accepted Answer

A)  $1,000 billion. 
B)  $1,200 billion. 
C)  $1,300 billion. 
D)  $1,400 billion. 
A)  $1,000 billion. 
B)  $1,200 billion. 
C)  $1,300 billion. 
D)  $1,400 billion.

Question 4

Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4  
-Refer to Table 9.4. At an output level of $2,500, the level of aggregate expenditure is ________ billion.

Accepted Answer

A)  $1,200 
B)  $1,400 
C)  $1,700 
D)  $1,900 
A)  $1,200 
B)  $1,400 
C)  $1,700 
D)  $1,900

Question 5

Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Accepted Answer

A)  $100 billion. 
B)  $200 billion. 
C)  $300 billion. 
D)  $400 billion. 
A)  $100 billion. 
B)  $200 billion. 
C)  $300 billion. 
D)  $400 billion.

Question 6

Refer to the information provided in Figure 9.4 below to answer the questions that follow.   Figure 9.4
-Refer to Figure 9.4. The value of Point B is

Accepted Answer

A)  $3,000 billion. 
B)  $4,000 billion 
C)  $5,000 billion 
D)  the same as the value of Point A. 
A)  $3,000 billion. 
B)  $4,000 billion 
C)  $5,000 billion 
D)  the same as the value of Point A.

Question 7

The King of Rococo hires you as an economic consultant. He is concerned that the output level in Rococo is too high and that this will cause prices to rise. He feels that it is necessary to reduce output by $100 billion. He tells you that the MPC in Rococo is 0.9. Which of the following would be the best advice to give to the King of Rococo?

Accepted Answer

A)  increase government spending in Rococo by $100 billion 
B)  increase taxes in Rococo by $100 billion 
C)  reduce government spending in Rococo by $90 billion 
D)  reduce government spending in Rococo by $10 billion 
A)  increase government spending in Rococo by $100 billion 
B)  increase taxes in Rococo by $100 billion 
C)  reduce government spending in Rococo by $90 billion 
D)  reduce government spending in Rococo by $10 billion

Question 8

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 an output level of $1,200 billion, there is an unplanned inventory change of

Accepted Answer

A)  positive $100 billion. 
B)  zero. 
C)  negative $200 billion. 
D)  positive $200 billion. 
A)  positive $100 billion. 
B)  zero. 
C)  negative $200 billion. 
D)  positive $200 billion.

Question 9

The economy of Bananaland can be characterized by Equation 9.5.
EQUATION 9.5:
C = 2,000 + 0.75Yd
T = 200
G = 400
I = 500
-Refer to Equation 9.5. The equilibrium level of income in Bananaland is

Accepted Answer

A)  4,800. 
B)  5,600. 
C)  10,000. 
D)  11,000. 
A)  4,800. 
B)  5,600. 
C)  10,000. 
D)  11,000.

Question 10

During recessions, government spending usually

Accepted Answer

A)  decreases because unemployment payments decrease. 
B)  increases because unemployment payments increase. 
C)  decrease because unemployment payments increase. 
D)  increases because unemployment payments decrease. 
A)  decreases because unemployment payments decrease. 
B)  increases because unemployment payments increase. 
C)  decrease because unemployment payments increase. 
D)  increases because unemployment payments decrease.

Question 11

If the MPS is 0.4 and t is 0.3, then the tax multiplier is about -1.03.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a category of fiscal policy?

Accepted Answer

A)  government policies regarding the purchase of goods and services 
B)  government policies regarding taxation 
C)  government policies regarding money supply in the economy 
D)  government policies regarding transfer payments and welfare benefits 
A)  government policies regarding the purchase of goods and services 
B)  government policies regarding taxation 
C)  government policies regarding money supply in the economy 
D)  government policies regarding transfer payments and welfare benefits

Question 13

Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1  
-Refer to Table 9.1 At an output level of $1,200 billion, there is a tendency for output

Accepted Answer

A)  to fall. 
B)  to increase. 
C)  to remain constant. 
D)  to either increase or decrease. 
A)  to fall. 
B)  to increase. 
C)  to remain constant. 
D)  to either increase or decrease.

Question 14

If the government increases taxes by $4 billion and increases spending by $4 billion, equilibrium output increases by $4 billion.

Accepted Answer

A) True 
 B)False

Question 15

If the tax multiplier is -4, the MPS is

Accepted Answer

A)  0.2. 
B)  0.3. 
C)  0.4. 
D)  0.5. 
A)  0.2. 
B)  0.3. 
C)  0.4. 
D)  0.5.

Question 16

If the MPS is 0.1, the tax multiplier is

Accepted Answer

A)  10. 
B)  -5. 
C)  -9. 
D)  -10. 
A)  10. 
B)  -5. 
C)  -9. 
D)  -10.

Question 17

Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

Accepted Answer

A)  an unplanned rise in inventories. 
B)  an unplanned fall in inventories. 
C)  an unplanned inventory change of zero. 
D)  either an unplanned increase or decrease in inventories depending on the value of the MPC. 
A)  an unplanned rise in inventories. 
B)  an unplanned fall in inventories. 
C)  an unplanned inventory change of zero. 
D)  either an unplanned increase or decrease in inventories depending on the value of the MPC.

Question 18

Refer to the information provided in Figure 9.1 below to answer the questions that follow.   Figure 9.1
-Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is

Accepted Answer

A)  $400 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion. 
A)  $400 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion.

Question 19

The ratio of the change in the equilibrium level of output to a change in government purchases is the

Accepted Answer

A)  government purchases multiplier. 
B)  government deficit ratio. 
C)  government surplus-to-deficit ratio. 
D)  output expenditure equilibrium. 
A)  government purchases multiplier. 
B)  government deficit ratio. 
C)  government surplus-to-deficit ratio. 
D)  output expenditure equilibrium.

Question 20

Refer to the information provided in Figure 9.3 below to answer the questions that follow.   Figure 9.3
-Refer to Figure 9.3. If autonomous planned expenditure increases by $20 billion, equilibrium aggregate output ________ to $________ billion.

Accepted Answer

A)  decreases; 360 
B)  increases; 550 
C)  increases; 600 
D)  increases; 640 
A)  decreases; 360 
B)  increases; 550 
C)  increases; 600 
D)  increases; 640

The aggregate consumption function is C = 800 + 0.8Yd. If income is $2,000 and net taxes are $500, consumption equals

When the government sector is included in the income-expenditure model, the equation for aggregate income is

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1. At an output level of $1,200 billion, the level of aggregate expenditure is

Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 -Refer to Table 9.4. At an output level of $2,500, the level of aggregate expenditure is ________ billion.

Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. The value of Point B is

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 an output level of $1,200 billion, there is an unplanned inventory change of

The economy of Bananaland can be characterized by Equation 9.5. EQUATION 9.5: C = 2,000 + 0.75Yd T = 200 G = 400 I = 500 -Refer to Equation 9.5. The equilibrium level of income in Bananaland is

During recessions, government spending usually

If the MPS is 0.4 and t is 0.3, then the tax multiplier is about -1.03.

Which of the following is not a category of fiscal policy?

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1 At an output level of $1,200 billion, there is a tendency for output

If the government increases taxes by $4 billion and increases spending by $4 billion, equilibrium output increases by $4 billion.

If the tax multiplier is -4, the MPS is

If the MPS is 0.1, the tax multiplier is

Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is

The ratio of the change in the equilibrium level of output to a change in government purchases is the

Refer to the information provided in Figure 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. If autonomous planned expenditure increases by $20 billion, equilibrium aggregate output to $ billion.

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

The aggregate consumption function is C = 800 + 0.8Yd. If income is $2,000 and net taxes are $500, consumption equals

When the government sector is included in the income-expenditure model, the equation for aggregate income is

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1. At an output level of $1,200 billion, the level of aggregate expenditure is

Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 -Refer to Table 9.4. At an output level of $2,500, the level of aggregate expenditure is ________ billion.

Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. The value of Point B is

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 an output level of $1,200 billion, there is an unplanned inventory change of

The economy of Bananaland can be characterized by Equation 9.5. EQUATION 9.5: C = 2,000 + 0.75Yd T = 200 G = 400 I = 500 -Refer to Equation 9.5. The equilibrium level of income in Bananaland is

During recessions, government spending usually

If the MPS is 0.4 and t is 0.3, then the tax multiplier is about -1.03.

Which of the following is not a category of fiscal policy?

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1 At an output level of $1,200 billion, there is a tendency for output

If the government increases taxes by $4 billion and increases spending by $4 billion, equilibrium output increases by $4 billion.

If the tax multiplier is -4, the MPS is

If the MPS is 0.1, the tax multiplier is

Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is

The ratio of the change in the equilibrium level of output to a change in government purchases is the

Refer to the information provided in Figure 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. If autonomous planned expenditure increases by $20 billion, equilibrium aggregate output ________ to $________ billion.

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 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. If autonomous planned expenditure increases by $20 billion, equilibrium aggregate output to $ billion.