Question 1

In which case will the government collect more tax revenue?

Accepted Answer

A)  50% tax rate and $50,000 average income 
B)  70% tax rate and $20,000 average income 
C)  10% tax rate and $120,000 average income 
D)  5% tax rate and $200,000 average income 
A)  50% tax rate and $50,000 average income 
B)  70% tax rate and $20,000 average income 
C)  10% tax rate and $120,000 average income 
D)  5% tax rate and $200,000 average income

Question 2

The budget deficit is equal to government spending plus tax revenue.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2  
-Refer to Table 9.2. The equilibrium level of output is ________ billion.

Accepted Answer

A)  $1000 
B)  $1,500 
C)  $2,000 
D)  $2,500 
A)  $1000 
B)  $1,500 
C)  $2,000 
D)  $2,500

Question 4

A government's debt is reduced when it

Accepted Answer

A)  balances is budget. 
B)  sells more bonds. 
C)  runs a deficit. 
D)  runs a surplus. 
A)  balances is budget. 
B)  sells more bonds. 
C)  runs a deficit. 
D)  runs a surplus.

Question 5

Assume that in the United States the actual deficit is $750 billion. If the United States were at full employment, the deficit would be $150 billion. The structural deficit in the United States is

Accepted Answer

A)  $150 billion. 
B)  $600 billion. 
C)  $750 billion. 
D)  $900 billion. 
A)  $150 billion. 
B)  $600 billion. 
C)  $750 billion. 
D)  $900 billion.

Question 6

If government spending is increased by $500, taxes are reduced by $200, and the MPS is 0.2, equilibrium output will change by

Accepted Answer

A)  $1,500. 
B)  $1,700. 
C)  $3,300. 
D)  $3,500. 
A)  $1,500. 
B)  $1,700. 
C)  $3,300. 
D)  $3,500.

Question 7

When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.

Accepted Answer

A) True 
 B)False

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, the level of aggregate expenditure is

Accepted Answer

A)  $1,100 billion. 
B)  $1,250 billion. 
C)  $1,400 billion. 
D)  $1,450 billion. 
A)  $1,100 billion. 
B)  $1,250 billion. 
C)  $1,400 billion. 
D)  $1,450 billion.

Question 9

Assume that taxes depend on income. The MPC is 0.8 and t is 0.4. If government purchases increase by $100 billion, the equilibrium level of output will increase by

Accepted Answer

A)  $16.7 billion. 
B)  $57.5 billion. 
C)  $192.31 billion. 
D)  $215.9 billion. 
A)  $16.7 billion. 
B)  $57.5 billion. 
C)  $192.31 billion. 
D)  $215.9 billion.

Question 10

When taxes are a function of income, the investment multiplier, government spending multiplier, and tax multiplier are all less than they would be if taxes were a lump sum amount.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the information provided in Figure 9.5 below to answer the questions that follow.   Figure 9.5
-Refer to Figure 9.5. [400 + 0.75Y] best represents the

Accepted Answer

A)  tax multiplier. 
B)  aggregate expenditure function. 
C)  saving function. 
D)  government spending multiplier. 
A)  tax multiplier. 
B)  aggregate expenditure function. 
C)  saving function. 
D)  government spending multiplier.

Question 12

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, the value of saving

Accepted Answer

A)  cannot be determined from the given information. 
B)  is $300 billion. 
C)  is $200 billion. 
D)  is $100 billion. 
A)  cannot be determined from the given information. 
B)  is $300 billion. 
C)  is $200 billion. 
D)  is $100 billion.

Question 13

The tax multiplier is

Accepted Answer

A)  the ratio of the change in taxes to the change in the equilibrium level of output. 
B)  the MPC multiplied by the MPS. 
C)  the difference in taxes multiplied by the change in the equilibrium level of output. 
D)  the ratio of the change in the equilibrium level of output to the change in taxes. 
A)  the ratio of the change in taxes to the change in the equilibrium level of output. 
B)  the MPC multiplied by the MPS. 
C)  the difference in taxes multiplied by the change in the equilibrium level of output. 
D)  the ratio of the change in the equilibrium level of output to the change in taxes.

Question 14

Assume that the MPC is 0.8. If government purchases increase by $500, equilibrium output ________; and if taxes increase by $500, equilibrium output ________.

Accepted Answer

A)  increases by $2,500; decreases by $2,000 
B)  increases by $4,000; decreases by $3,000 
C)  increases by $2,000; decreases by $1,000 
D)  increases by $1,600; decreases by $1,200 
A)  increases by $2,500; decreases by $2,000 
B)  increases by $4,000; decreases by $3,000 
C)  increases by $2,000; decreases by $1,000 
D)  increases by $1,600; decreases by $1,200

Question 15

Refer to the information provided in Figure 9.3 below to answer the questions that follow.   Figure 9.3
-Refer to Figure 9.3. At equilibrium, autonomous planned expenditures equal $________ billion.

Accepted Answer

A)  100 
B)  200 
C)  300 
D)  500 
A)  100 
B)  200 
C)  300 
D)  500

Question 16

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 an unplanned inventory change of

Accepted Answer

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

Question 17

The Norwegian economy can be characterized by Equation 9.3.
EQUATION 9.3:
C = 100 + 0.8Yd
G = 500
T = 200
I = 200
-Refer to Equation 9.3. At the equilibrium level of output in Norway, saving equals

Accepted Answer

A)  1,660. 
B)  850. 
C)  630. 
D)  500. 
A)  1,660. 
B)  850. 
C)  630. 
D)  500.

Question 18

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 for saving

Accepted Answer

A)  is $600. 
B)  is $1,400. 
C)  is $1,200. 
D)  cannot be determined from this information. 
A)  is $600. 
B)  is $1,400. 
C)  is $1,200. 
D)  cannot be determined from this information.

Question 19

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, what is the value of consumption?

Accepted Answer

A)  $2,000 
B)  $1,350 
C)  $1,300 
D)  $1,150 
A)  $2,000 
B)  $1,350 
C)  $1,300 
D)  $1,150

Question 20

As the tax rate decreases, the absolute value of the tax multiplier

Accepted Answer

A)  increases. 
B)  decreases. 
C)  does not change. 
D)  could either increase or decrease depending on the value of the MPC. 
A)  increases. 
B)  decreases. 
C)  does not change. 
D)  could either increase or decrease depending on the value of the MPC.

Exam 9: The Government and Fiscal Policy

In which case will the government collect more tax revenue?

The budget deficit is equal to government spending plus tax revenue.

Refer to the information provided in Table 9.2 below to answer the questions that follow. Table 9.2 -Refer to Table 9.2. The equilibrium level of output is ________ billion.

A government's debt is reduced when it

Assume that in the United States the actual deficit is $750 billion. If the United States were at full employment, the deficit would be $150 billion. The structural deficit in the United States is

If government spending is increased by $500, taxes are reduced by $200, and the MPS is 0.2, equilibrium output will change by

When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.

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, the level of aggregate expenditure is

Assume that taxes depend on income. The MPC is 0.8 and t is 0.4. If government purchases increase by $100 billion, the equilibrium level of output will increase by

When taxes are a function of income, the investment multiplier, government spending multiplier, and tax multiplier are all less than they would be if taxes were a lump sum amount.

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. [400 + 0.75Y] best represents the

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, the value of saving

The tax multiplier is

Assume that the MPC is 0.8. If government purchases increase by $500, equilibrium output ________; and if taxes increase by $500, equilibrium output ________.

Refer to the information provided in Figure 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. At equilibrium, autonomous planned expenditures equal $________ billion.

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 an unplanned inventory change of

The Norwegian economy can be characterized by Equation 9.3. EQUATION 9.3: C = 100 + 0.8Yd G = 500 T = 200 I = 200 -Refer to Equation 9.3. At the equilibrium level of output in Norway, saving equals

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 for saving

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, what is the value of consumption?

As the tax rate decreases, the absolute value of the tax multiplier

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 purchases increase by $500, equilibrium output ; and if taxes increase by $500, equilibrium output .