Question 1

List the five categories of federal government expenditures.

Accepted Answer

1.Defense spending
2.Transfer

Question 2

If Congress wanted to counteract the effects of a recession it could

Accepted Answer

A) increase tax rates. 
B) increase taxes by a fixed amount. 
C) increase government purchases. 
D) decrease defense spending. 
A) increase tax rates. 
B) increase taxes by a fixed amount. 
C) increase government purchases. 
D) decrease defense spending.

Question 3

The federal government debt as a percentage of GDP fell

Accepted Answer

A) from 2002-2007. 
B) from 1980-1992. 
C) during World War I and World War II. 
D) from 1998-2001. 
E) during the Great Depression. 
A) from 2002-2007. 
B) from 1980-1992. 
C) during World War I and World War II. 
D) from 1998-2001. 
E) during the Great Depression.

Question 4

To combat a recession with discretionary fiscal policy,Congress and the president should

Accepted Answer

A) decrease government spending to balance the budget. 
B) decrease taxes to increase consumer disposable income. 
C) lower interest rates and increase investment by increasing the money supply. 
D) raise taxes on interest and dividends,but not on personal income. 
A) decrease government spending to balance the budget. 
B) decrease taxes to increase consumer disposable income. 
C) lower interest rates and increase investment by increasing the money supply. 
D) raise taxes on interest and dividends,but not on personal income.

Question 5

What is the difference between federal purchases and federal expenditures?

Accepted Answer

Federal purchases refer to federal spend

Question 6

The gap between potential GDP and real GDP had been as large as 7 percent during the worst of the 2007-2009 recession.By 2015,the gap

Accepted Answer

A) had been eliminated. 
B) was still nearly 3 percent. 
C) remained at 7 percent. 
D) was positive,with real GDP exceeding potential GDP. 
A) had been eliminated. 
B) was still nearly 3 percent. 
C) remained at 7 percent. 
D) was positive,with real GDP exceeding potential GDP.

Question 7

if government spending and the price level increase,then

Accepted Answer

A) the interest rate increases,consumption declines,and investment spending declines. 
B) the interest rate decreases,consumption declines,and investment spending declines. 
C) the interest rate increases,consumption increases,and investment spending increases. 
D) the interest rate decreases,consumption increases,and investment spending increases. 
A) the interest rate increases,consumption declines,and investment spending declines. 
B) the interest rate decreases,consumption declines,and investment spending declines. 
C) the interest rate increases,consumption increases,and investment spending increases. 
D) the interest rate decreases,consumption increases,and investment spending increases.

Question 8

Illustrate and explain the effects of tax reduction and simplification using the dynamic aggregate demand and supply model.To simplify the analysis,assume that aggregate demand is not affected by the tax cut.

Accepted Answer

@#IMG-DLM& The economy's initial equilibrium is at

Question 9

Figure 16-6  
-Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

Accepted Answer

A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) expansionary automatic stabilizers. 
A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) expansionary monetary policy. 
D) contractionary monetary policy. 
E) expansionary automatic stabilizers.

Question 10

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

Accepted Answer

A) $250 billion 
B) $400 billion 
C) $640 billion 
D) None of the above are correct.Taxes should be increased in this case. 
A) $250 billion 
B) $400 billion 
C) $640 billion 
D) None of the above are correct.Taxes should be increased in this case.

Question 11

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Accepted Answer

A) 10 
B) 5 
C) 4 
D) 3 
A) 10 
B) 5 
C) 4 
D) 3

Question 12

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 13

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

Accepted Answer

A) higher interest rates and a lower exchange rate. 
B) higher interest rates and a higher exchange rate. 
C) lower interest rates and a lower exchange rate. 
D) lower interest rates and a higher exchange rate. 
A) higher interest rates and a lower exchange rate. 
B) higher interest rates and a higher exchange rate. 
C) lower interest rates and a lower exchange rate. 
D) lower interest rates and a higher exchange rate.

Question 14

A change in tax rates

Accepted Answer

A) has a less complicated effect on GDP than does a tax cut of a fixed amount. 
B) has a larger multiplier effect the smaller the tax rate. 
C) will not affect disposable income. 
D) will not affect the size of the multiplier. 
A) has a less complicated effect on GDP than does a tax cut of a fixed amount. 
B) has a larger multiplier effect the smaller the tax rate. 
C) will not affect disposable income. 
D) will not affect the size of the multiplier.

Question 15

From the 1960s to 2014,transfer payments

Accepted Answer

A) have risen from 25 percent to about 48 percent of federal government expenditures. 
B) remained the same percentage of total federal government expenditures. 
C) have declined by half as a percentage of total federal government expenditures. 
D) have grown very slowly as a percentage of total federal government expenditures. 
A) have risen from 25 percent to about 48 percent of federal government expenditures. 
B) remained the same percentage of total federal government expenditures. 
C) have declined by half as a percentage of total federal government expenditures. 
D) have grown very slowly as a percentage of total federal government expenditures.

Question 16

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 17

If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

Accepted Answer

An expansionary fiscal policy will cause

Question 18

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Accepted Answer

A) 2.78 
B) 5 
C) 6.25 
D) 100 
A) 2.78 
B) 5 
C) 6.25 
D) 100

Question 19

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Accepted Answer

A) 10 
B) 9 
C) 5 
D) 1 
A) 10 
B) 9 
C) 5 
D) 1

Question 20

Double taxation refers to

Accepted Answer

A) corporations paying taxes on profits and individuals paying taxes on wage income. 
B) individuals paying taxes on wage income and individuals paying taxes on dividends. 
C) corporations paying taxes on profits and individuals paying taxes on dividends. 
D) corporations paying taxes on capital gains and individuals paying taxes on wage income. 
A) corporations paying taxes on profits and individuals paying taxes on wage income. 
B) individuals paying taxes on wage income and individuals paying taxes on dividends. 
C) corporations paying taxes on profits and individuals paying taxes on dividends. 
D) corporations paying taxes on capital gains and individuals paying taxes on wage income.

List the five categories of federal government expenditures.

If Congress wanted to counteract the effects of a recession it could

The federal government debt as a percentage of GDP fell

To combat a recession with discretionary fiscal policy,Congress and the president should

What is the difference between federal purchases and federal expenditures?

The gap between potential GDP and real GDP had been as large as 7 percent during the worst of the 2007-2009 recession.By 2015,the gap

if government spending and the price level increase,then

Illustrate and explain the effects of tax reduction and simplification using the dynamic aggregate demand and supply model.To simplify the analysis,assume that aggregate demand is not affected by the tax cut.

Figure 16-6 -Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

A change in tax rates

From the 1960s to 2014,transfer payments

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Double taxation refers to

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Inflation,unemployment,and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 16: Fiscal Policy

List the five categories of federal government expenditures.

If Congress wanted to counteract the effects of a recession it could

The federal government debt as a percentage of GDP fell

To combat a recession with discretionary fiscal policy,Congress and the president should

What is the difference between federal purchases and federal expenditures?

The gap between potential GDP and real GDP had been as large as 7 percent during the worst of the 2007-2009 recession.By 2015,the gap

if government spending and the price level increase,then

Illustrate and explain the effects of tax reduction and simplification using the dynamic aggregate demand and supply model.To simplify the analysis,assume that aggregate demand is not affected by the tax cut.

Figure 16-6 -Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

If the absolute value of the tax multiplier equals 1.6,real GDP is $13 trillion,and potential real GDP is $13.4 trillion,then taxes would need to be cut by ________ to restore the economy to potential real GDP.

Assume a closed economy,that taxes are fixed,and the marginal propensity to consume is equal to 0.8.What is the government spending multiplier?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

A change in tax rates

From the 1960s to 2014,transfer payments

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Double taxation refers to

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Inflation,unemployment,and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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