Question 1

In 2016, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2016, the city of Canfield had a

Accepted Answer

A)  budget surplus of $450,000. 
B)  budget surplus of $50,000. 
C)  budget deficit of $50,000. 
D)  budget surplus of $5,000. 
A)  budget surplus of $450,000. 
B)  budget surplus of $50,000. 
C)  budget deficit of $50,000. 
D)  budget surplus of $5,000.

Question 2

If tax receipts are less than government expenditures the government is running a deficit.

Accepted Answer

A) True 
 B)False

Question 3

When investment is greater than planned investment, output grows.

Accepted Answer

A) True 
 B)False

Question 4

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 low. The unemployment rate can be increased if aggregate output decreases. He wants to know what policy to pursue to decrease aggregate output by $100 billion. The best estimate he has for the MPC is 0.9. Which of the following policies should you recommend?

Accepted Answer

A)  Decrease government spending by $10 billion. 
B)  Decrease government spending by $100 billion. 
C)  Increase taxes by $100 billion. 
D)  Cut taxes by $60 billion and to increase government spending by $60 billion. 
A)  Decrease government spending by $10 billion. 
B)  Decrease government spending by $100 billion. 
C)  Increase taxes by $100 billion. 
D)  Cut taxes by $60 billion and to increase government spending by $60 billion.

Question 5

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 purchases by $75 billion. 
B)  Reduce taxes by $75 billion. 
C)  Reduce taxes by $75 billion and to increase government purchases by $75 billion. 
D)  Reduce the budget deficit by $300 billion. 
A)  Increase government purchases by $75 billion. 
B)  Reduce taxes by $75 billion. 
C)  Reduce taxes by $75 billion and to increase government purchases by $75 billion. 
D)  Reduce the budget deficit by $300 billion.

Question 6

If the MPS is 0.2, the tax multiplier is

Accepted Answer

A)  -1.11. 
B)  -4. 
C)  -5. 
D)  -9. 
A)  -1.11. 
B)  -4. 
C)  -5. 
D)  -9.

Question 7

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. Assuming constant MPC, at income of $1,200 million, saving is $________ million, at income of $1,600 million, saving is $________ million.

Accepted Answer

A)  150; 230 
B)  160; 240 
C)  170; 250 
D)  180; 260 
A)  150; 230 
B)  160; 240 
C)  170; 250 
D)  180; 260

Question 8

The government budget is balanced when tax receipts equal government spending.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the information provided in Figure 9.1 below to answer the questions that follow.   Figure 9.1
-Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.

Accepted Answer

A)  1,500 
B)  2,000 
C)  3,000 
D)  4,000 
A)  1,500 
B)  2,000 
C)  3,000 
D)  4,000

Question 10

The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
-Refer to Equation 9.1. The equilibrium level of output for the Italian economy is

Accepted Answer

A)  $2,850. 
B)  $3,145. 
C)  $3,700. 
D)  $3,800. 
A)  $2,850. 
B)  $3,145. 
C)  $3,700. 
D)  $3,800.

Question 11

What is the largest expenditure source in the government's budget?

Accepted Answer

A)  consumption 
B)  transfer payments 
C)  net interest payments 
D)  net subsidies 
A)  consumption 
B)  transfer payments 
C)  net interest payments 
D)  net subsidies

Question 12

The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
-Refer to Equation 9.1. At the equilibrium level of output in Italy, consumption equals

Accepted Answer

A)  $3,100. 
B)  $3,250. 
C)  $3,400. 
D)  $3,625. 
A)  $3,100. 
B)  $3,250. 
C)  $3,400. 
D)  $3,625.

Question 13

If government purchases are decreased by $800 and taxes are decreased by $800, the equilibrium level of income will

Accepted Answer

A)  decrease by $800. 
B)  increase by $800. 
C)  not change. 
D)  decrease by $1600. 
A)  decrease by $800. 
B)  increase by $800. 
C)  not change. 
D)  decrease by $1600.

Question 14

In an expansion the U.S. federal government deficit automatically grows.

Accepted Answer

A) True 
 B)False

Question 15

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 = 200 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?

Accepted Answer

A)  $1,100 
B)  $1,250 
C)  $1,350 
D)  $1,800 
A)  $1,100 
B)  $1,250 
C)  $1,350 
D)  $1,800

Question 16

If taxes depend on income, then the absolute value of the tax 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 17

When taxes depend on income, a higher tax rate implies a higher government spending multiplier.

Accepted Answer

A) True 
 B)False

Question 18

If taxes were a lump-sum amount, then the absolute value of the tax multiplier ________ it would be if taxes depend on income.

Accepted Answer

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

Question 19

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 $2,000 billion, there is an unplanned inventory change of

Accepted Answer

A)  positive $100 billion. 
B)  positive $10 billion. 
C)  negative $100 billion. 
D)  zero. 
A)  positive $100 billion. 
B)  positive $10 billion. 
C)  negative $100 billion. 
D)  zero.

Question 20

The formula for the aggregate consumption function is [C = a + b(Y - T)] ________ the income-expenditure model.

Accepted Answer

A)  after government is subtracted from 
B)  after net exports are added to 
C)  when consumption is left out of 
D)  after government is added to 
A)  after government is subtracted from 
B)  after net exports are added to 
C)  when consumption is left out of 
D)  after government is added to

In 2016, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2016, the city of Canfield had a

If tax receipts are less than government expenditures the government is running a deficit.

When investment is greater than planned investment, output grows.

If the MPS is 0.2, the tax multiplier is

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. Assuming constant MPC, at income of $1,200 million, saving is $ million, at income of $1,600 million, saving is $ million.

The government budget is balanced when tax receipts equal government spending.

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.

The Italian economy can be characterized by Equation 9.1. EQUATION 9.1: C = 300 + 0.8Yd G = 400 T = 200 I = 200 -Refer to Equation 9.1. The equilibrium level of output for the Italian economy is

What is the largest expenditure source in the government's budget?

The Italian economy can be characterized by Equation 9.1. EQUATION 9.1: C = 300 + 0.8Yd G = 400 T = 200 I = 200 -Refer to Equation 9.1. At the equilibrium level of output in Italy, consumption equals

If government purchases are decreased by $800 and taxes are decreased by $800, the equilibrium level of income will

In an expansion the U.S. federal government deficit automatically grows.

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 = 200 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?

If taxes depend on income, then the absolute value of the tax multiplier ________ it would be if taxes were a lump-sum amount.

When taxes depend on income, a higher tax rate implies a higher government spending multiplier.

If taxes were a lump-sum amount, then the absolute value of the tax multiplier ________ it would be if taxes depend on income.

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 $2,000 billion, there is an unplanned inventory change of

The formula for the aggregate consumption function is [C = a + b(Y - T)] ________ the income-expenditure model.

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

In 2016, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2016, the city of Canfield had a

If tax receipts are less than government expenditures the government is running a deficit.

When investment is greater than planned investment, output grows.

If the MPS is 0.2, the tax multiplier is

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. Assuming constant MPC, at income of $1,200 million, saving is $________ million, at income of $1,600 million, saving is $________ million.

The government budget is balanced when tax receipts equal government spending.

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.

The Italian economy can be characterized by Equation 9.1. EQUATION 9.1: C = 300 + 0.8Yd G = 400 T = 200 I = 200 -Refer to Equation 9.1. The equilibrium level of output for the Italian economy is

What is the largest expenditure source in the government's budget?

The Italian economy can be characterized by Equation 9.1. EQUATION 9.1: C = 300 + 0.8Yd G = 400 T = 200 I = 200 -Refer to Equation 9.1. At the equilibrium level of output in Italy, consumption equals

If government purchases are decreased by $800 and taxes are decreased by $800, the equilibrium level of income will

In an expansion the U.S. federal government deficit automatically grows.

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 = 200 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?

If taxes depend on income, then the absolute value of the tax multiplier ________ it would be if taxes were a lump-sum amount.

When taxes depend on income, a higher tax rate implies a higher government spending multiplier.

If taxes were a lump-sum amount, then the absolute value of the tax multiplier ________ it would be if taxes depend on income.

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 $2,000 billion, there is an unplanned inventory change of

The formula for the aggregate consumption function is [C = a + b(Y - T)] ________ the income-expenditure model.

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 Table 9.5 below to answer the questions that follow. Table 9.5 All Numbers are in $ Million -Refer to Table 9.5. Assuming constant MPC, at income of $1,200 million, saving is $ million, at income of $1,600 million, saving is $ million.