Question 1

If the MPS is 0.1, the government spending multiplier is

Accepted Answer

A)  10. 
B)  5. 
C)  2. 
D)  1.11. 
A)  10. 
B)  5. 
C)  2. 
D)  1.11.

Question 2

An increase in lump-sum taxes will

Accepted Answer

A)  make the consumption function flatter. 
B)  make the consumption function steeper. 
C)  shift the consumption function downward. 
D)  shift the consumption function upward. 
A)  make the consumption function flatter. 
B)  make the consumption function steeper. 
C)  shift the consumption function downward. 
D)  shift the consumption function upward.

Question 3

Assume that taxes depend on income. The MPC is 0.8 and t is 0.2. The government spending multiplier is

Accepted Answer

A)  1.25. 
B)  2.78. 
C)  4. 
D)  4.17. 
A)  1.25. 
B)  2.78. 
C)  4. 
D)  4.17.

Question 4

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 $1,500 billion, the level of aggregate expenditure is ________ billion.

Accepted Answer

A)  $1,300 
B)  $1,400 
C)  $1,500 
D)  $1,600 
A)  $1,300 
B)  $1,400 
C)  $1,500 
D)  $1,600

Question 5

Assume an economy is in equilibrium at an output level of $1,500 billion. If government spending increases by $200 billion, then at the output level of $1,500 billion, there is

Accepted Answer

A)  an unplanned rise in inventories. 
B)  an unplanned fall in inventories. 
C)  an unplanned inventory change of zero. 
D)  either an unplanned increase or decrease in inventories depending on the value of the MPC. 
A)  an unplanned rise in inventories. 
B)  an unplanned fall in inventories. 
C)  an unplanned inventory change of zero. 
D)  either an unplanned increase or decrease in inventories depending on the value of the MPC.

Question 6

Which of the following is correct regarding tax revenues?

Accepted Answer

A)  they increase during recessions 
B)  they do not change with changes in the tax rate 
C)  they are the only revenue source in the government's budget 
D)  they decrease during economic slowdowns 
A)  they increase during recessions 
B)  they do not change with changes in the tax rate 
C)  they are the only revenue source in the government's budget 
D)  they decrease during economic slowdowns

Question 7

If the economy's full-employment output is $6 trillion, actual output is $3.5 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)  debt deficit. 
A)  natural employment deficit. 
B)  cyclical deficit. 
C)  structural deficit. 
D)  debt deficit.

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 $2,400 billion, there is a tendency for output

Accepted Answer

A)  to fall. 
B)  to increase. 
C)  to remain constant. 
D)  to either increase or decrease. 
A)  to fall. 
B)  to increase. 
C)  to remain constant. 
D)  to either increase or decrease.

Question 9

During recessions, automatic stabilizers work to reduce government expenditures and increase government revenues.

Accepted Answer

A) True 
 B)False

Question 10

When the MPC is 0.5 and t is 0.2, then the government spending multiplier is about -1.67.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is a correct sequence of events during a recession?

Accepted Answer

A)  unemployment falls, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises 
B)  unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises 
C)  unemployment rises, income falls, tax revenue rises, unemployment benefits fall, and the budget deficit falls 
D)  unemployment rises, income rises, tax revenue rises, unemployment benefits rise, and the budget deficit rises 
A)  unemployment falls, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises 
B)  unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises 
C)  unemployment rises, income falls, tax revenue rises, unemployment benefits fall, and the budget deficit falls 
D)  unemployment rises, income rises, tax revenue rises, unemployment benefits rise, and the budget deficit rises

Question 12

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 $600 billion, disposable income equals

Accepted Answer

A)  zero. 
B)  $100 billion. 
C)  $300 billion. 
D)  $500 billion. 
A)  zero. 
B)  $100 billion. 
C)  $300 billion. 
D)  $500 billion.

Question 13

The tax multiplier is a negative multiplier.

Accepted Answer

A) True 
 B)False

Question 14

Transfer payments are the ________ in the government's budget.

Accepted Answer

A)  smallest expenditure source 
B)  largest expenditure source 
C)  smallest revenue source 
D)  largest revenue source 
A)  smallest expenditure source 
B)  largest expenditure source 
C)  smallest revenue source 
D)  largest revenue source

Question 15

The spending and taxing policies used by the government to influence the economy refer to

Accepted Answer

A)  monetary policy. 
B)  ad hoc policy. 
C)  fiscal policy. 
D)  trade policy. 
A)  monetary policy. 
B)  ad hoc policy. 
C)  fiscal policy. 
D)  trade policy.

Question 16

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 equilibrium level of income is

Accepted Answer

A)  $3,800 billion. 
B)  $3,600 billion. 
C)  $3,400 billion. 
D)  $2,000 billion. 
A)  $3,800 billion. 
B)  $3,600 billion. 
C)  $3,400 billion. 
D)  $2,000 billion.

Question 17

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 = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is

Accepted Answer

A)  $400 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion. 
A)  $400 billion. 
B)  $300 billion. 
C)  $200 billion. 
D)  $100 billion.

Question 18

The economy of Bananaland can be characterized by Equation 9.5.
EQUATION 9.5:
C = 2,000 + 0.75Yd
T = 200
G = 400
I = 500
-Refer to Equation 9.5. If government spending in Bananaland increases by $50, equilibrium output increases by

Accepted Answer

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

Question 19

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 $3,000 billion, the value of saving is ________ billion.

Accepted Answer

A)  $400 
B)  $450 
C)  $500 
D)  $550 
A)  $400 
B)  $450 
C)  $500 
D)  $550

Question 20

As the tax rate increases, 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.

Exam 9: The Government and Fiscal Policy

If the MPS is 0.1, the government spending multiplier is

An increase in lump-sum taxes will

Assume that taxes depend on income. The MPC is 0.8 and t is 0.2. The government spending multiplier is

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 $1,500 billion, the level of aggregate expenditure is ________ billion.

Assume an economy is in equilibrium at an output level of $1,500 billion. If government spending increases by $200 billion, then at the output level of $1,500 billion, there is

Which of the following is correct regarding tax revenues?

If the economy's full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

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 $2,400 billion, there is a tendency for output

During recessions, automatic stabilizers work to reduce government expenditures and increase government revenues.

When the MPC is 0.5 and t is 0.2, then the government spending multiplier is about -1.67.

Which of the following is a correct sequence of events during a recession?

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 $600 billion, disposable income equals

The tax multiplier is a negative multiplier.

Transfer payments are the ________ in the government's budget.

The spending and taxing policies used by the government to influence the economy refer to

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 equilibrium level of income is

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 = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is

The economy of Bananaland can be characterized by Equation 9.5. EQUATION 9.5: C = 2,000 + 0.75Yd T = 200 G = 400 I = 500 -Refer to Equation 9.5. If government spending in Bananaland increases by $50, equilibrium output increases by

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 $3,000 billion, the value of saving is ________ billion.

As the tax rate increases, the government spending 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

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