Question 1

If government purchases are increased by $100, taxes are reduced by $100, and the MPC is 0.8, equilibrium output will change by

Accepted Answer

A)  -$400. 
B)  $900. 
C)  $1,800. 
D)  an amount that cannot be determined from this information. 
A)  -$400. 
B)  $900. 
C)  $1,800. 
D)  an amount that cannot be determined from this information.

Question 2

If the government wants to increase employment, government purchases should be ________ and/or taxes should be ________.

Accepted Answer

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

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. The value of the tax multiplier is

Accepted Answer

A)  -10. 
B)  -9. 
C)  -5. 
D)  -4. 
A)  -10. 
B)  -9. 
C)  -5. 
D)  -4.

Question 4

Which of the following is incorrect regarding tax revenues?

Accepted Answer

A)  they increase during recessions 
B)  they change with changes in the tax rate 
C)  they are a revenue source in the government's budget 
D)  they increase during economic expansions 
A)  they increase during recessions 
B)  they change with changes in the tax rate 
C)  they are a revenue source in the government's budget 
D)  they increase during economic expansions

Question 5

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 $700 billion. The best estimate he has for the MPC is 0.8. Which of the following policies should you recommend?

Accepted Answer

A)  reduce government spending by $350 billion and reduce taxes by $250 billion 
B)  increase both government spending and taxes by $700 billion 
C)  increase government spending by $350 billion and reduce taxes by $700 billion 
D)  increase government spending by $700 billion and taxes by $600 billion 
A)  reduce government spending by $350 billion and reduce taxes by $250 billion 
B)  increase both government spending and taxes by $700 billion 
C)  increase government spending by $350 billion and reduce taxes by $700 billion 
D)  increase government spending by $700 billion and taxes by $600 billion

Question 6

Which of the following is 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 transfer payments and welfare benefits 
D)  all of the above 
A)  government policies regarding the purchase of goods and services 
B)  government policies regarding taxation 
C)  government policies regarding transfer payments and welfare benefits 
D)  all of the above

Question 7

If the economy is in a recession, the full-employment deficit is ________ the actual deficit.

Accepted Answer

A)  larger than 
B)  equal to 
C)  smaller than 
D)  equal to or larger than 
A)  larger than 
B)  equal to 
C)  smaller than 
D)  equal to or larger than

Question 8

The presence of automatic stabilizers means that the federal deficit is ________ than it otherwise would be in a recession and ________ than it otherwise would be in an expansion.

Accepted Answer

A)  larger; smaller 
B)  smaller; larger 
C)  smaller; smaller 
D)  larger; larger 
A)  larger; smaller 
B)  smaller; larger 
C)  smaller; smaller 
D)  larger; larger

Question 9

If the government spending multiplier is 5 and government spending decreases by $200 billion, output will ________ by $________ billion.

Accepted Answer

A)  increase; 200 
B)  decrease; 1,000 
C)  decrease; 40 
D)  decrease; 200 
A)  increase; 200 
B)  decrease; 1,000 
C)  decrease; 40 
D)  decrease; 200

Question 10

The ________ and the ________ determine tax revenues.

Accepted Answer

A)  money supply; income tax rate 
B)  income of households; value of transfer payments 
C)  income tax rate; income of households 
D)  value of transfer payments; money supply 
A)  money supply; income tax rate 
B)  income of households; value of transfer payments 
C)  income tax rate; income of households 
D)  value of transfer payments; money supply

Question 11

If the tax multiplier is -8.42, then the government purchases multiplier

Accepted Answer

A)  is 9.42. 
B)  is 8.42. 
C)  is 1.58. 
D)  cannot be determined because the MPS is not given. 
A)  is 9.42. 
B)  is 8.42. 
C)  is 1.58. 
D)  cannot be determined because the MPS is not given.

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. If aggregate expenditures are represented by AE2 and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Accepted Answer

A)  100 
B)  200 
C)  400 
D)  800 
A)  100 
B)  200 
C)  400 
D)  800

Question 13

The government budget deficit or surplus is the difference between what a government ________ and what it ________ in a year.

Accepted Answer

A)  pays for imports; spends on exports 
B)  spends; collects in taxes 
C)  earns from transfers; pays in transfers 
D)  spends on programs; gives away in foreign aid 
A)  pays for imports; spends on exports 
B)  spends; collects in taxes 
C)  earns from transfers; pays in transfers 
D)  spends on programs; gives away in foreign aid

Question 14

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, there is an unplanned inventory

Accepted Answer

A)  increase of $300 billion. 
B)  decrease of $200 billion. 
C)  change of $0. 
D)  increase of $200 billion. 
A)  increase of $300 billion. 
B)  decrease of $200 billion. 
C)  change of $0. 
D)  increase of $200 billion.

Question 15

The Peruvian economy can be characterized by Equation 9.4.
EQUATION 9.4:
C = 400 + 0.6Yd
Taxes = 600
Equilibrium Output = $4,000
-Refer to Equation 9.4. At equilibrium, the sum of investment and government purchases in Peru is

Accepted Answer

A)  2,040. 
B)  1,560. 
C)  1,440. 
D)  cannot be determined from the given information 
A)  2,040. 
B)  1,560. 
C)  1,440. 
D)  cannot be determined from the given information

Question 16

Related to the Economics in Practice on p. 176: In 2014, the Congressional Budget Office estimated that with no changes to current laws, the federal debt will reach more than 100 percent of GDP by the year

Accepted Answer

A)  2017. 
B)  2024. 
C)  2039. 
D)  2066. 
A)  2017. 
B)  2024. 
C)  2039. 
D)  2066.

Question 17

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 of aggregate expenditure is ________ billion.

Accepted Answer

A)  $1,500 
B)  $2,000 
C)  $2,200 
D)  $2,300 
A)  $1,500 
B)  $2,000 
C)  $2,200 
D)  $2,300

Question 18

The balanced-budget multiplier

Accepted Answer

A)  equals 0. 
B)  is greater than 0 but less than 1. 
C)  is greater than 1. 
D)  equals 1. 
A)  equals 0. 
B)  is greater than 0 but less than 1. 
C)  is greater than 1. 
D)  equals 1.

Question 19

In 2016, the city of Miketown collected $250,000 in taxes and spent $350,000. In 2016, the city of Miketown had a

Accepted Answer

A)  budget surplus of $100,000. 
B)  budget surplus of 57%. 
C)  budget deficit of $100,000. 
D)  budget deficit of $200,000. 
A)  budget surplus of $100,000. 
B)  budget surplus of 57%. 
C)  budget deficit of $100,000. 
D)  budget deficit of $200,000.

Question 20

If the MPS is 0.5, the tax multiplier is

Accepted Answer

A)  -5. 
B)  -2. 
C)  -1. 
D)  -0.5. 
A)  -5. 
B)  -2. 
C)  -1. 
D)  -0.5.

If government purchases are increased by $100, taxes are reduced by $100, and the MPC is 0.8, equilibrium output will change by

If the government wants to increase employment, government purchases should be and/or taxes should be .

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. The value of the tax multiplier is

Which of the following is incorrect regarding tax revenues?

Which of the following is a category of fiscal policy?

If the economy is in a recession, the full-employment deficit is ________ the actual deficit.

The presence of automatic stabilizers means that the federal deficit is than it otherwise would be in a recession and than it otherwise would be in an expansion.

If the government spending multiplier is 5 and government spending decreases by $200 billion, output will by $ billion.

The and the determine tax revenues.

If the tax multiplier is -8.42, then the government purchases multiplier

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

The government budget deficit or surplus is the difference between what a government and what it in a year.

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, there is an unplanned inventory

The Peruvian economy can be characterized by Equation 9.4. EQUATION 9.4: C = 400 + 0.6Yd Taxes = 600 Equilibrium Output = $4,000 -Refer to Equation 9.4. At equilibrium, the sum of investment and government purchases in Peru is

Related to the Economics in Practice on p. 176: In 2014, the Congressional Budget Office estimated that with no changes to current laws, the federal debt will reach more than 100 percent of GDP by the year

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 of aggregate expenditure is ________ billion.

The balanced-budget multiplier

In 2016, the city of Miketown collected $250,000 in taxes and spent $350,000. In 2016, the city of Miketown had a

If the MPS is 0.5, the tax multiplier is

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 government purchases are increased by $100, taxes are reduced by $100, and the MPC is 0.8, equilibrium output will change by

If the government wants to increase employment, government purchases should be ________ and/or taxes should be ________.

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. The value of the tax multiplier is

Which of the following is incorrect regarding tax revenues?

Which of the following is a category of fiscal policy?

If the economy is in a recession, the full-employment deficit is ________ the actual deficit.

The presence of automatic stabilizers means that the federal deficit is ________ than it otherwise would be in a recession and ________ than it otherwise would be in an expansion.

If the government spending multiplier is 5 and government spending decreases by $200 billion, output will ________ by $________ billion.

The ________ and the ________ determine tax revenues.

If the tax multiplier is -8.42, then the government purchases multiplier

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. If aggregate expenditures are represented by AE2 and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

The government budget deficit or surplus is the difference between what a government ________ and what it ________ in a year.

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, there is an unplanned inventory

The Peruvian economy can be characterized by Equation 9.4. EQUATION 9.4: C = 400 + 0.6Yd Taxes = 600 Equilibrium Output = $4,000 -Refer to Equation 9.4. At equilibrium, the sum of investment and government purchases in Peru is

Related to the Economics in Practice on p. 176: In 2014, the Congressional Budget Office estimated that with no changes to current laws, the federal debt will reach more than 100 percent of GDP by the year

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 of aggregate expenditure is ________ billion.

The balanced-budget multiplier

In 2016, the city of Miketown collected $250,000 in taxes and spent $350,000. In 2016, the city of Miketown had a

If the MPS is 0.5, the tax multiplier is

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

If the government wants to increase employment, government purchases should be and/or taxes should be .

The presence of automatic stabilizers means that the federal deficit is than it otherwise would be in a recession and than it otherwise would be in an expansion.

If the government spending multiplier is 5 and government spending decreases by $200 billion, output will by $ billion.

The and the determine tax revenues.

Refer to the information provided in Figure 9.4 below to answer the questions that follow. Figure 9.4 -Refer to Figure 9.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

The government budget deficit or surplus is the difference between what a government and what it in a year.