Question 1

If autonomous spending increases, the aggregate expenditure function becomes steeper.

Accepted Answer

A) True 
 B)False

Question 2

The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
-Refer to Equation 9.2. At equilibrium, saving in Canada equals

Accepted Answer

A)  $1,200. 
B)  $1,250. 
C)  $1,350. 
D)  $1,600. 
A)  $1,200. 
B)  $1,250. 
C)  $1,350. 
D)  $1,600.

Question 3

The amount the government owes to the public is the deficit.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the information provided in Table 9.6 below to answer the questions that follow.
Table 9.6
All Figures in Billions of Dollars  
-Refer to Table 9.6. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Accepted Answer

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

Question 5

Federal transfer payments and grants-in-aid as a percentage of GDP primarily declined during the

Accepted Answer

A)  Bill Clinton administrations. 
B)  George W. Bush administrations. 
C)  Barack Obama administrations. 
D)  both A and C 
A)  Bill Clinton administrations. 
B)  George W. Bush administrations. 
C)  Barack Obama administrations. 
D)  both A and C

Question 6

Automatic stabilizers work during both economic recessions and economic expansions.

Accepted Answer

A) True 
 B)False

Question 7

If taxes depend on income, then the magnitude of the government spending multiplier ________ it would be if taxes were a lump-sum amount.

Accepted Answer

A)  could be either larger than or smaller than 
B)  is larger than 
C)  is equal to what 
D)  is smaller than 
A)  could be either larger than or smaller than 
B)  is larger than 
C)  is equal to what 
D)  is smaller than

Question 8

If the government spending multiplier is 2 and government purchases increase by $200 billion, output will increase by

Accepted Answer

A)  $100 billion. 
B)  $400 billion. 
C)  $500 billion. 
D)  $1,600 billion. 
A)  $100 billion. 
B)  $400 billion. 
C)  $500 billion. 
D)  $1,600 billion.

Question 9

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 $100 billion and increases taxes by $100 billion, equilibrium aggregate output

Accepted Answer

A)  does not change. 
B)  increases by $100 billion. 
C)  increases by less than $100 billion. 
D)  increases by more than $100 billion. 
A)  does not change. 
B)  increases by $100 billion. 
C)  increases by less than $100 billion. 
D)  increases by more than $100 billion.

Question 10

If the MPS is 0.25 and t is 0.4, then the tax multiplier is about -2.96.

Accepted Answer

A) True 
 B)False

Question 11

If government purchases are increased by $30, taxes are reduced by $30, and the MPC is 0.75, equilibrium output will change by

Accepted Answer

A)  $900. 
B)  $210. 
C)  $30. 
D)  zero. 
A)  $900. 
B)  $210. 
C)  $30. 
D)  zero.

Question 12

If the tax multiplier is -5.25, then the government purchases multiplier

Accepted Answer

A)  is 6.25. 
B)  is 4.75. 
C)  is 0.75. 
D)  cannot be determined because the MPS is not given. 
A)  is 6.25. 
B)  is 4.75. 
C)  is 0.75. 
D)  cannot be determined because the MPS is not given.

Question 13

Automatic stabilizers include those elements of government spending that automatically grow during a recession.

Accepted Answer

A) True 
 B)False

Question 14

[Y = C + I + G] when ________ in the income-expenditure model.

Accepted Answer

A)  net exports are included 
B)  net imports are included 
C)  government is included 
D)  investment is excluded 
A)  net exports are included 
B)  net imports are included 
C)  government is included 
D)  investment is excluded

Question 15

You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $300 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?

Accepted Answer

A)  Increase government spending by $300 billion and reduce taxes by $300 billion. 
B)  Reduce government spending by $300 billion and increase taxes by $300 billion. 
C)  Increase both government spending and taxes by $300 billion. 
D)  Decrease both government spending and taxes by $300 billion. 
A)  Increase government spending by $300 billion and reduce taxes by $300 billion. 
B)  Reduce government spending by $300 billion and increase taxes by $300 billion. 
C)  Increase both government spending and taxes by $300 billion. 
D)  Decrease both government spending and taxes by $300 billion.

Question 16

If the economy's full-employment output is $9 trillion, actual output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

Accepted Answer

A)  natural employment deficit. 
B)  cyclical deficit. 
C)  structural deficit. 
D)  fiscal deficit. 
A)  natural employment deficit. 
B)  cyclical deficit. 
C)  structural deficit. 
D)  fiscal deficit.

Question 17

Bill's income is $1,000 and his net taxes are $350. His disposable income is

Accepted Answer

A)  $1,350. 
B)  $750. 
C)  $650. 
D)  -$350. 
A)  $1,350. 
B)  $750. 
C)  $650. 
D)  -$350.

Question 18

Refer to the information provided in Table 9.6 below to answer the questions that follow.
Table 9.6
All Figures in Billions of Dollars  
-Refer to Table 9.6. The economy is at the equilibrium level of output. If government spending decreases by $100 billion, the new equilibrium level of output is

Accepted Answer

A)  $3,100 billion. 
B)  $2,400 billion. 
C)  $1,550 billion. 
D)  $1,450 billion. 
A)  $3,100 billion. 
B)  $2,400 billion. 
C)  $1,550 billion. 
D)  $1,450 billion.

Question 19

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ________; and if taxes increase by $200, equilibrium output ________.

Accepted Answer

A)  increases by $1,000; decreases by $800 
B)  increases by $800; decreases by $600 
C)  increases by $1,000; decreases by $1,000 
D)  increases by $1,600; decreases by $1,200 
A)  increases by $1,000; decreases by $800 
B)  increases by $800; decreases by $600 
C)  increases by $1,000; decreases by $1,000 
D)  increases by $1,600; decreases by $1,200

Question 20

Disposable income is income less net taxes.

Accepted Answer

A) True 
 B)False

If autonomous spending increases, the aggregate expenditure function becomes steeper.

The Canadian economy can be characterized by Equation 9.2. EQUATION 9.2: C = 500 + 0.5Yd Taxes = 600 Equilibrium Output = $4,000 -Refer to Equation 9.2. At equilibrium, saving in Canada equals

The amount the government owes to the public is the deficit.

Refer to the information provided in Table 9.6 below to answer the questions that follow. Table 9.6 All Figures in Billions of Dollars -Refer to Table 9.6. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Federal transfer payments and grants-in-aid as a percentage of GDP primarily declined during the

Automatic stabilizers work during both economic recessions and economic expansions.

If taxes depend on income, then the magnitude of the government spending multiplier ________ it would be if taxes were a lump-sum amount.

If the government spending multiplier is 2 and government purchases increase by $200 billion, output will increase by

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 $100 billion and increases taxes by $100 billion, equilibrium aggregate output

If the MPS is 0.25 and t is 0.4, then the tax multiplier is about -2.96.

If government purchases are increased by $30, taxes are reduced by $30, and the MPC is 0.75, equilibrium output will change by

If the tax multiplier is -5.25, then the government purchases multiplier

Automatic stabilizers include those elements of government spending that automatically grow during a recession.

[Y = C + I + G] when ________ in the income-expenditure model.

If the economy's full-employment output is $9 trillion, actual output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

Bill's income is $1,000 and his net taxes are $350. His disposable income is

Refer to the information provided in Table 9.6 below to answer the questions that follow. Table 9.6 All Figures in Billions of Dollars -Refer to Table 9.6. The economy is at the equilibrium level of output. If government spending decreases by $100 billion, the new equilibrium level of output is

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ; and if taxes increase by $200, equilibrium output .

Disposable income is income less net taxes.

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

If autonomous spending increases, the aggregate expenditure function becomes steeper.

The Canadian economy can be characterized by Equation 9.2. EQUATION 9.2: C = 500 + 0.5Yd Taxes = 600 Equilibrium Output = $4,000 -Refer to Equation 9.2. At equilibrium, saving in Canada equals

The amount the government owes to the public is the deficit.

Refer to the information provided in Table 9.6 below to answer the questions that follow. Table 9.6 All Figures in Billions of Dollars -Refer to Table 9.6. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is

Federal transfer payments and grants-in-aid as a percentage of GDP primarily declined during the

Automatic stabilizers work during both economic recessions and economic expansions.

If taxes depend on income, then the magnitude of the government spending multiplier ________ it would be if taxes were a lump-sum amount.

If the government spending multiplier is 2 and government purchases increase by $200 billion, output will increase by

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 $100 billion and increases taxes by $100 billion, equilibrium aggregate output

If the MPS is 0.25 and t is 0.4, then the tax multiplier is about -2.96.

If government purchases are increased by $30, taxes are reduced by $30, and the MPC is 0.75, equilibrium output will change by

If the tax multiplier is -5.25, then the government purchases multiplier

Automatic stabilizers include those elements of government spending that automatically grow during a recession.

[Y = C + I + G] when ________ in the income-expenditure model.

If the economy's full-employment output is $9 trillion, actual output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

Bill's income is $1,000 and his net taxes are $350. His disposable income is

Refer to the information provided in Table 9.6 below to answer the questions that follow. Table 9.6 All Figures in Billions of Dollars -Refer to Table 9.6. The economy is at the equilibrium level of output. If government spending decreases by $100 billion, the new equilibrium level of output is

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ________; and if taxes increase by $200, equilibrium output ________.

Disposable income is income less net taxes.

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

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ; and if taxes increase by $200, equilibrium output .