Question 1

If the MPC is 0.7, the tax multiplier is

Accepted Answer

A)  -1.22. 
B)  -2.22. 
C)  -2.33. 
D)  -3.33. 
A)  -1.22. 
B)  -2.22. 
C)  -2.33. 
D)  -3.33.

Question 2

If output is greater than planned aggregate expenditure, there will be

Accepted Answer

A)  an unplanned increase in inventories. 
B)  an unplanned decrease in inventories. 
C)  no change in inventories. 
D)  a planned increase in inventories. 
A)  an unplanned increase in inventories. 
B)  an unplanned decrease in inventories. 
C)  no change in inventories. 
D)  a planned increase in inventories.

Question 3

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, equilibrium aggregate expenditures increase to $________ billion.

Accepted Answer

A)  1,700 
B)  1,800 
C)  2,000 
D)  2,400 
A)  1,700 
B)  1,800 
C)  2,000 
D)  2,400

Question 4

Refer to the information provided in Figure 9.5 below to answer the questions that follow.   Figure 9.5
-Refer to Figure 9.5. At aggregate output of $2,400 billion, unplanned inventories equal $________ billion.

Accepted Answer

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

Question 5

Refer to the information provided in Figure 9.3 below to answer the questions that follow.   Figure 9.3
-Refer to Figure 9.3. The tax multiplier is

Accepted Answer

A)  -4. 
B)  -2.5. 
C)  -2. 
D)  -1.5. 
A)  -4. 
B)  -2.5. 
C)  -2. 
D)  -1.5.

Question 6

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

Accepted Answer

A)  automatic stabilizers 
B)  unplanned inventory changes 
C)  net exports 
D)  the tax multiplier 
A)  automatic stabilizers 
B)  unplanned inventory changes 
C)  net exports 
D)  the tax multiplier

Question 7

In 2016, the city of Springfield collected $375,000 in taxes and spent $450,000. In 2016, the city of Springfield had a

Accepted Answer

A)  budget surplus of $825,000. 
B)  budget surplus of $75,000. 
C)  budget deficit of $125,000. 
D)  budget deficit of $75,000. 
A)  budget surplus of $825,000. 
B)  budget surplus of $75,000. 
C)  budget deficit of $125,000. 
D)  budget deficit of $75,000.

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. At equilibrium, ________ equal $300 billion.

Accepted Answer

A)  autonomous planned expenditures 
B)  autonomous consumption 
C)  autonomous saving 
D)  break even income 
A)  autonomous planned expenditures 
B)  autonomous consumption 
C)  autonomous saving 
D)  break even income

Question 9

If the tax multiplier is -12 and taxes are increased by $6 billion, output

Accepted Answer

A)  falls by $2 billion. 
B)  falls by $72 billion. 
C)  increases by $2 billion. 
D)  increases by $72 billion. 
A)  falls by $2 billion. 
B)  falls by $72 billion. 
C)  increases by $2 billion. 
D)  increases by $72 billion.

Question 10

The behavior of the Federal Reserve concerning interest rates is called fiscal policy.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the information provided in Table 9.4 below to answer the questions that follow.
Table 9.4  
-Refer to Table 9.4. The equilibrium level of output is ________ billion.

Accepted Answer

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

Question 12

Defense spending is the largest part of the U.S. government spending.

Accepted Answer

A) True 
 B)False

Question 13

If the MPC is 0.75, the government spending multiplier is

Accepted Answer

A)  4. 
B)  3. 
C)  2.5. 
D)  1.75. 
A)  4. 
B)  3. 
C)  2.5. 
D)  1.75.

Question 14

If the MPS is 0.8 and t is 0.3, then the tax multiplier is about -1.03.

Accepted Answer

A) True 
 B)False

Question 15

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.

Accepted Answer

A)  increases by $1,000; decreases by $1,000 
B)  increases by $900; decreases by $1,000 
C)  increases by $1,000; decreases by $900 
D)  increases by $400; decreases by $400 
A)  increases by $1,000; decreases by $1,000 
B)  increases by $900; decreases by $1,000 
C)  increases by $1,000; decreases by $900 
D)  increases by $400; decreases by $400

Question 16

For the economy to be in equilibrium, government purchases plus ________ must equal saving plus ________.

Accepted Answer

A)  consumption; investment 
B)  tax revenue; consumption 
C)  investment; tax revenue 
D)  tax revenue; investment 
A)  consumption; investment 
B)  tax revenue; consumption 
C)  investment; tax revenue 
D)  tax revenue; investment

Question 17

As the tax rate decreases, the government spending 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.

Question 18

The federal government ran a surplus during both the 1993-2000 Clinton administrations and the 2001-2008 Bush administrations.

Accepted Answer

A) True 
 B)False

Question 19

Assume that taxes depend on income. The MPC is 0.5 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 20

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 $60 billion. 
B)  Increase government purchases by $150 billion. 
C)  Cut taxes by $60 billion. 
D)  Cut taxes by $60 billion and to increase government purchases by $60 billion. 
A)  Increase government purchases by $60 billion. 
B)  Increase government purchases by $150 billion. 
C)  Cut taxes by $60 billion. 
D)  Cut taxes by $60 billion and to increase government purchases by $60 billion.

If the MPC is 0.7, the tax multiplier is

If output is greater than planned aggregate expenditure, there will be

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, equilibrium aggregate expenditures increase to $________ billion.

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. At aggregate output of $2,400 billion, unplanned inventories equal $________ billion.

Refer to the information provided in Figure 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. The tax multiplier is

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

In 2016, the city of Springfield collected $375,000 in taxes and spent $450,000. In 2016, the city of Springfield had a

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, ________ equal $300 billion.

If the tax multiplier is -12 and taxes are increased by $6 billion, output

The behavior of the Federal Reserve concerning interest rates is called fiscal policy.

Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 -Refer to Table 9.4. The equilibrium level of output is ________ billion.

Defense spending is the largest part of the U.S. government spending.

If the MPC is 0.75, the government spending multiplier is

If the MPS is 0.8 and t is 0.3, then the tax multiplier is about -1.03.

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ; and if taxes increase by $100, equilibrium output .

For the economy to be in equilibrium, government purchases plus must equal saving plus .

As the tax rate decreases, the government spending multiplier

The federal government ran a surplus during both the 1993-2000 Clinton administrations and the 2001-2008 Bush administrations.

Assume that taxes depend on income. The MPC is 0.5 and t is 0.2. If government spending increases by $10 billion, the equilibrium level of output will increase 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

Exam 9: The Government and Fiscal Policy

If the MPC is 0.7, the tax multiplier is

If output is greater than planned aggregate expenditure, there will be

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, equilibrium aggregate expenditures increase to $________ billion.

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. At aggregate output of $2,400 billion, unplanned inventories equal $________ billion.

Refer to the information provided in Figure 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. The tax multiplier is

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

In 2016, the city of Springfield collected $375,000 in taxes and spent $450,000. In 2016, the city of Springfield had a

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, ________ equal $300 billion.

If the tax multiplier is -12 and taxes are increased by $6 billion, output

The behavior of the Federal Reserve concerning interest rates is called fiscal policy.

Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 -Refer to Table 9.4. The equilibrium level of output is ________ billion.

Defense spending is the largest part of the U.S. government spending.

If the MPC is 0.75, the government spending multiplier is

If the MPS is 0.8 and t is 0.3, then the tax multiplier is about -1.03.

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.

For the economy to be in equilibrium, government purchases plus ________ must equal saving plus ________.

As the tax rate decreases, the government spending multiplier

The federal government ran a surplus during both the 1993-2000 Clinton administrations and the 2001-2008 Bush administrations.

Assume that taxes depend on income. The MPC is 0.5 and t is 0.2. If government spending increases by $10 billion, the equilibrium level of output will increase 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

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ; and if taxes increase by $100, equilibrium output .

For the economy to be in equilibrium, government purchases plus must equal saving plus .