Question 1

In the circular flow of income, both saving and net taxes flow into government.

Accepted Answer

A) True 
 B)False

Question 2

When the tax rate increases, the absolute value of the tax multiplier falls.

Accepted Answer

A) True 
 B)False

Question 3

Assume that taxes depend on income. The MPC is 0.75 and t is 0.2. If government spending increases by $10 billion, the equilibrium level of output will increase by

Accepted Answer

A)  $16.7 billion. 
B)  $25 billion. 
C)  $50 billion. 
D)  $100 billion. 
A)  $16.7 billion. 
B)  $25 billion. 
C)  $50 billion. 
D)  $100 billion.

Question 4

As the size of the MPC increases, the value of the balanced-budget multiplier

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  could either increase or decrease. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  could either increase or decrease.

Question 5

Refer to the information provided in Figure 9.5 below to answer the questions that follow.   Figure 9.5
-Refer to Figure 9.5. The MPC equals ________ and the MPS equals ________.

Accepted Answer

A)  0.5; 0.5 
B)  0.75; 0.25 
C)  0.8; 0.2 
D)  0.9; 0.1 
A)  0.5; 0.5 
B)  0.75; 0.25 
C)  0.8; 0.2 
D)  0.9; 0.1

Question 6

In 2016, the city of Sylvester collected $800,000 in taxes and spent $200,000. In 2016, the city of Sylvester had a

Accepted Answer

A)  budget surplus of $200,000. 
B)  budget surplus of $600,000. 
C)  budget deficit of $200,000. 
D)  budget surplus of $1,000,000. 
A)  budget surplus of $200,000. 
B)  budget surplus of $600,000. 
C)  budget deficit of $200,000. 
D)  budget surplus of $1,000,000.

Question 7

The ratio of the change in the equilibrium level of output to the change in taxes is the

Accepted Answer

A)  tax multiplier. 
B)  tax revenue calculator. 
C)  tax rebate ratio. 
D)  government tax deficit. 
A)  tax multiplier. 
B)  tax revenue calculator. 
C)  tax rebate ratio. 
D)  government tax deficit.

Question 8

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 $________ billion, equilibrium aggregate output increases to $750 billion.

Accepted Answer

A)  20 
B)  50 
C)  100 
D)  200 
A)  20 
B)  50 
C)  100 
D)  200

Question 9

As the MPC increases, the absolute value of the tax multiplier increases.

Accepted Answer

A) True 
 B)False

Question 10

If government spending is increased by $1,000 and taxes are increased by $1,000, the equilibrium level of income will

Accepted Answer

A)  decrease by $1,000. 
B)  not change. 
C)  increase by $1,000. 
D)  increase by $2,000. 
A)  decrease by $1,000. 
B)  not change. 
C)  increase by $1,000. 
D)  increase by $2,000.

Question 11

The balanced-budget multiplier always equals 1.

Accepted Answer

A) True 
 B)False

Question 12

The aggregate consumption function is C = 1,000 + 0.9Yd. If income is $3,600 and net taxes are $600, consumption equals

Accepted Answer

A)  2,400. 
B)  3,400. 
C)  3,700. 
D)  4,000. 
A)  2,400. 
B)  3,400. 
C)  3,700. 
D)  4,000.

Question 13

The structural deficit is the deficit at full employment.

Accepted Answer

A) True 
 B)False

Question 14

Assume an economy is in equilibrium at an output level of $600 billion. If government purchases decrease by $75 billion, then at the output level of $600 billion, there is

Accepted Answer

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

Question 15

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 $2,500, the level for saving

Accepted Answer

A)  is $300. 
B)  is $400. 
C)  is $500. 
D)  cannot be determined from this information. 
A)  is $300. 
B)  is $400. 
C)  is $500. 
D)  cannot be determined from this information.

Question 16

A tax cut of $5 billion will have a greater effect on the economy than an increase in government purchases of $5 billion.

Accepted Answer

A) True 
 B)False

Question 17

Personal taxes are the ________ in the government's budget.

Accepted Answer

A)  smallest expenditure source 
B)  largest expenditure source 
C)  smallest revenue source 
D)  largest revenue source 
A)  smallest expenditure source 
B)  largest expenditure source 
C)  smallest revenue source 
D)  largest revenue source

Question 18

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 increases spending by $200 billion and increases taxes by $200 billion, equilibrium aggregate output

Accepted Answer

A)  does not change. 
B)  increases by $200 billion. 
C)  increases by less than $200 billion. 
D)  increases by more than $200 billion. 
A)  does not change. 
B)  increases by $200 billion. 
C)  increases by less than $200 billion. 
D)  increases by more than $200 billion.

Question 19

If the MPC is 0.9, the tax multiplier is

Accepted Answer

A)  -10. 
B)  -9. 
C)  -1.10. 
D)  10. 
A)  -10. 
B)  -9. 
C)  -1.10. 
D)  10.

Question 20

If government spending is increased by $300, taxes are reduced by $300, and the MPS is 0.5, equilibrium output will change by

Accepted Answer

A)  $0. 
B)  $300. 
C)  $900. 
D)  an amount that cannot be determined from this information. 
A)  $0. 
B)  $300. 
C)  $900. 
D)  an amount that cannot be determined from this information.

Exam 9: The Government and Fiscal Policy

In the circular flow of income, both saving and net taxes flow into government.

When the tax rate increases, the absolute value of the tax multiplier falls.

Assume that taxes depend on income. The MPC is 0.75 and t is 0.2. If government spending increases by $10 billion, the equilibrium level of output will increase by

As the size of the MPC increases, the value of the balanced-budget multiplier

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. The MPC equals ________ and the MPS equals ________.

In 2016, the city of Sylvester collected $800,000 in taxes and spent $200,000. In 2016, the city of Sylvester had a

The ratio of the change in the equilibrium level of output to the change in taxes 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 $________ billion, equilibrium aggregate output increases to $750 billion.

As the MPC increases, the absolute value of the tax multiplier increases.

If government spending is increased by $1,000 and taxes are increased by $1,000, the equilibrium level of income will

The balanced-budget multiplier always equals 1.

The aggregate consumption function is C = 1,000 + 0.9Yd. If income is $3,600 and net taxes are $600, consumption equals

The structural deficit is the deficit at full employment.

Assume an economy is in equilibrium at an output level of $600 billion. If government purchases decrease by $75 billion, then at the output level of $600 billion, there 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 $2,500, the level for saving

A tax cut of $5 billion will have a greater effect on the economy than an increase in government purchases of $5 billion.

Personal taxes are the ________ in the government's budget.

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 increases spending by $200 billion and increases taxes by $200 billion, equilibrium aggregate output

If the MPC is 0.9, the tax multiplier is

If government spending is increased by $300, taxes are reduced by $300, and the MPS is 0.5, equilibrium output will change by

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 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. The MPC equals and the MPS equals .