Question 1

A decrease in which of the following would decrease the tax wedge?

Accepted Answer

A) marginal tax rate 
B) money supply 
C) national debt 
D) federal budget deficit 
A) marginal tax rate 
B) money supply 
C) national debt 
D) federal budget deficit

Question 2

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Accepted Answer

A) be at potential GDP. 
B) be above potential GDP. 
C) be below potential GDP. 
D) There is insufficient information given here to draw a conclusion. 
A) be at potential GDP. 
B) be above potential GDP. 
C) be below potential GDP. 
D) There is insufficient information given here to draw a conclusion.

Question 3

Figure 16-3  
-Refer to Figure 16-3.In the graph above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?

Accepted Answer

A) a decrease in income taxes 
B) a decrease in interest rates 
C) a decrease in government purchases 
D) an increase in the money supply 
A) a decrease in income taxes 
B) a decrease in interest rates 
C) a decrease in government purchases 
D) an increase in the money supply

Question 4

As spending on government purchases increases,income rises and money demand falls.

Accepted Answer

A) True 
 B)False

Question 5

Government transfer payments include which of the following?

Accepted Answer

A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense 
A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense

Question 6

The use of fiscal policy to stabilize the economy is limited because

Accepted Answer

A) changes in government spending and tax rates have a small effect on aggregate demand. 
B) changes in government spending and tax rates have a small effect on interest rates. 
C) the legislative process can be slow,which means that it is difficult to make fiscal policy actions in a timely way. 
D) the Internal Revenue Service (IRS)resists changes in tax rates because of all the changes they would have to make to the tax code. 
A) changes in government spending and tax rates have a small effect on aggregate demand. 
B) changes in government spending and tax rates have a small effect on interest rates. 
C) the legislative process can be slow,which means that it is difficult to make fiscal policy actions in a timely way. 
D) the Internal Revenue Service (IRS)resists changes in tax rates because of all the changes they would have to make to the tax code.

Question 7

In an open economy,the government purchases multiplier will be larger the

Accepted Answer

A) smaller the marginal propensity to import. 
B) smaller the marginal income tax rate. 
C) larger the marginal propensity to consume. 
D) All of the above are correct. 
A) smaller the marginal propensity to import. 
B) smaller the marginal income tax rate. 
C) larger the marginal propensity to consume. 
D) All of the above are correct.

Question 8

The federal government debt equals

Accepted Answer

A) tax revenues minus government spending. 
B) government spending minus tax revenues. 
C) the accumulation of past budget deficits. 
D) the total value of U.S.Treasury bonds outstanding. 
A) tax revenues minus government spending. 
B) government spending minus tax revenues. 
C) the accumulation of past budget deficits. 
D) the total value of U.S.Treasury bonds outstanding.

Question 9

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Accepted Answer

A) no 
B) partial 
C) complete 
D) more than complete 
A) no 
B) partial 
C) complete 
D) more than complete

Question 10

Figure 16-10  
-Refer to Figure 16-10.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

Accepted Answer

A) increase income taxes 
B) increase government spending 
C) buy Treasury bills 
D) decrease the discount rate 
A) increase income taxes 
B) increase government spending 
C) buy Treasury bills 
D) decrease the discount rate

Question 11

In the long run,most economists agree that a permanent increase in government spending leads to

Accepted Answer

A) no decrease in private spending. 
B) a decrease in private spending by less than the amount that government spending increased. 
C) a decrease in private spending by the same amount that government spending increased. 
D) a decrease in private spending by more than the amount that government spending increased. 
A) no decrease in private spending. 
B) a decrease in private spending by less than the amount that government spending increased. 
C) a decrease in private spending by the same amount that government spending increased. 
D) a decrease in private spending by more than the amount that government spending increased.

Question 12

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

Accepted Answer

A) decrease in taxes will be saved by households and not spent,and some portion will be spent on imported goods. 
B) decrease in taxes will be saved by households and not spent,and some portion will be spent on consumer durable goods. 
C) increase in government purchases will be saved by households and not spent,and some portion will be spent on imported goods. 
D) increase in government purchases will be saved by households and not spent,and some portion will be spent on consumer durable goods. 
A) decrease in taxes will be saved by households and not spent,and some portion will be spent on imported goods. 
B) decrease in taxes will be saved by households and not spent,and some portion will be spent on consumer durable goods. 
C) increase in government purchases will be saved by households and not spent,and some portion will be spent on imported goods. 
D) increase in government purchases will be saved by households and not spent,and some portion will be spent on consumer durable goods.

Question 13

A tax rebate by the government would

Accepted Answer

A) increase your pretax income,but not your disposable income. 
B) increase your disposable income,but not your pretax income. 
C) decrease your pretax income,but not your disposable income. 
D) decrease your disposable income,but not your pretax income. 
A) increase your pretax income,but not your disposable income. 
B) increase your disposable income,but not your pretax income. 
C) decrease your pretax income,but not your disposable income. 
D) decrease your disposable income,but not your pretax income.

Question 14

The federal government debt as a percentage of GDP did not rise

Accepted Answer

A) during the Great Depression. 
B) during World War II. 
C) during the 1960s. 
D) during the 1980s. 
A) during the Great Depression. 
B) during World War II. 
C) during the 1960s. 
D) during the 1980s.

Question 15

Which of the following statements about the Social Security,Medicare,and Medicaid programs is true?

Accepted Answer

A) Spending on these three programs will rise from 9.7% of GDP currently to 10.2% of GDP by 2050. 
B) Costs are being driven up by the fact that Americans are living longer and medical costs are rising substantially. 
C) Some economists have argued for decreasing taxes to help with these programs' funding problems. 
D) Some economists have argued for increasing benefits to help with these programs' funding problems. 
A) Spending on these three programs will rise from 9.7% of GDP currently to 10.2% of GDP by 2050. 
B) Costs are being driven up by the fact that Americans are living longer and medical costs are rising substantially. 
C) Some economists have argued for decreasing taxes to help with these programs' funding problems. 
D) Some economists have argued for increasing benefits to help with these programs' funding problems.

Question 16

The federal budget was in deficit from 1931 to 1939,except in the year 1937.Given this fact,how do you explain E.Cary Brown's statement,"Fiscal policy,then,seems to have been an unsuccessful recovery device in the 'thirties-not because it did not work,but because it was not tried."

Accepted Answer

Economist E.Cary Brown is arguing that w

Question 17

The tax multiplier

Accepted Answer

A) is negative. 
B) is larger in absolute value as compared to the government spending multiplier. 
C) is a measure of how much taxes will fall when income is falling. 
D) is always less than one. 
A) is negative. 
B) is larger in absolute value as compared to the government spending multiplier. 
C) is a measure of how much taxes will fall when income is falling. 
D) is always less than one.

Question 18

________ and ________ are the largest sources of revenue collected by the federal government.

Accepted Answer

A) Individual income taxes;corporate income taxes 
B) Individual income taxes;social insurance taxes 
C) Corporate income taxes;excise and other taxes 
D) Excise and other taxes;individual income taxes 
A) Individual income taxes;corporate income taxes 
B) Individual income taxes;social insurance taxes 
C) Corporate income taxes;excise and other taxes 
D) Excise and other taxes;individual income taxes

Question 19

Figure 16-1  
-Refer to Figure 16-1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E. 
A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E.

Question 20

The problem causing most recessions is too little

Accepted Answer

A) money (currency plus checking accounts). 
B) spending. 
C) unemployment. 
D) taxes. 
A) money (currency plus checking accounts). 
B) spending. 
C) unemployment. 
D) taxes.

A decrease in which of the following would decrease the tax wedge?

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Figure 16-3 -Refer to Figure 16-3.In the graph above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?

As spending on government purchases increases,income rises and money demand falls.

Government transfer payments include which of the following?

The use of fiscal policy to stabilize the economy is limited because

In an open economy,the government purchases multiplier will be larger the

The federal government debt equals

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Figure 16-10 -Refer to Figure 16-10.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

In the long run,most economists agree that a permanent increase in government spending leads to

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

A tax rebate by the government would

The federal government debt as a percentage of GDP did not rise

Which of the following statements about the Social Security,Medicare,and Medicaid programs is true?

The federal budget was in deficit from 1931 to 1939,except in the year 1937.Given this fact,how do you explain E.Cary Brown's statement,"Fiscal policy,then,seems to have been an unsuccessful recovery device in the 'thirties-not because it did not work,but because it was not tried."

The tax multiplier

and are the largest sources of revenue collected by the federal government.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

The problem causing most recessions is too little

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

Filters

Exam 16: Fiscal Policy

A decrease in which of the following would decrease the tax wedge?

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Figure 16-3 -Refer to Figure 16-3.In the graph above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?

As spending on government purchases increases,income rises and money demand falls.

Government transfer payments include which of the following?

The use of fiscal policy to stabilize the economy is limited because

In an open economy,the government purchases multiplier will be larger the

The federal government debt equals

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Figure 16-10 -Refer to Figure 16-10.In the graph above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could Congress and the president use to move the economy to point C?

In the long run,most economists agree that a permanent increase in government spending leads to

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

A tax rebate by the government would

The federal government debt as a percentage of GDP did not rise

Which of the following statements about the Social Security,Medicare,and Medicaid programs is true?

The federal budget was in deficit from 1931 to 1939,except in the year 1937.Given this fact,how do you explain E.Cary Brown's statement,"Fiscal policy,then,seems to have been an unsuccessful recovery device in the 'thirties-not because it did not work,but because it was not tried."

The tax multiplier

________ and ________ are the largest sources of revenue collected by the federal government.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

The problem causing most recessions is too little

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

Filters

and are the largest sources of revenue collected by the federal government.