Question 1

The tax multiplier equals the change in ________ divided by the change in ________.

Accepted Answer

A) taxes;equilibrium real GDP 
B) equilibrium real GDP;taxes 
C) taxes;consumption spending 
D) consumption spending;taxes 
A) taxes;equilibrium real GDP 
B) equilibrium real GDP;taxes 
C) taxes;consumption spending 
D) consumption spending;taxes

Question 2

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

Accepted Answer

A) Real equilibrium GDP will fall. 
B) Real equilibrium GDP will rise. 
C) There will be no change in real equilibrium GDP. 
D) Real equilibrium GDP will initially rise,but then fall below its previous equilibrium value. 
A) Real equilibrium GDP will fall. 
B) Real equilibrium GDP will rise. 
C) There will be no change in real equilibrium GDP. 
D) Real equilibrium GDP will initially rise,but then fall below its previous equilibrium value.

Question 3

In an open economy,the government purchases multiplier will be

Accepted Answer

A) larger as the marginal propensity to import decreases. 
B) smaller as the marginal propensity to import decreases. 
C) smaller as the marginal propensity to tax decreases. 
D) larger as the marginal propensity to consume decreases. 
A) larger as the marginal propensity to import decreases. 
B) smaller as the marginal propensity to import decreases. 
C) smaller as the marginal propensity to tax decreases. 
D) larger as the marginal propensity to consume decreases.

Question 4

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9,the tax rate equals 0.25,and the marginal propensity to import equals 0.15.

Accepted Answer

Government purchases

Question 5

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Accepted Answer

A) an induced;an autonomous 
B) an expansionary;a contractionary 
C) an autonomous;an induced 
D) a contractionary;an expansionary 
A) an induced;an autonomous 
B) an expansionary;a contractionary 
C) an autonomous;an induced 
D) a contractionary;an expansionary

Question 6

Which of the following best describes supply-side economics?

Accepted Answer

A) Labor productivity affects aggregate supply. 
B) Education affects labor productivity which affects aggregate supply. 
C) Education affects the incentive to work,save,and invest and,therefore,aggregate supply. 
D) Tax rates,particularly marginal tax rates,affect the incentive to work,save,and invest and,therefore,aggregate supply. 
A) Labor productivity affects aggregate supply. 
B) Education affects labor productivity which affects aggregate supply. 
C) Education affects the incentive to work,save,and invest and,therefore,aggregate supply. 
D) Tax rates,particularly marginal tax rates,affect the incentive to work,save,and invest and,therefore,aggregate supply.

Question 7

Which of the following would increase the size of the government purchases multiplier?

Accepted Answer

A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income 
A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income

Question 8

Figure 16-8  
-Refer to Figure 16-8.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 government purchases 
B) decrease government purchases 
C) increase income taxes 
D) sell Treasury bills 
A) increase government purchases 
B) decrease government purchases 
C) increase income taxes 
D) sell Treasury bills

Question 9

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Accepted Answer

A) expansionary;actual 
B) expansionary;cyclically adjusted 
C) contractionary;actual 
D) contractionary;cyclically adjusted 
A) expansionary;actual 
B) expansionary;cyclically adjusted 
C) contractionary;actual 
D) contractionary;cyclically adjusted

Question 10

Figure 16-1  
-Refer to Figure 16-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Accepted Answer

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

Question 11

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Accepted Answer

A) less than it would be without the supply-side effects. 
B) increased as aggregate real income and output rise in the long run. 
C) unaffected by the shifting long-run aggregate supply curve. 
D) dependent upon the impact of this tax change on consumer disposable income. 
A) less than it would be without the supply-side effects. 
B) increased as aggregate real income and output rise in the long run. 
C) unaffected by the shifting long-run aggregate supply curve. 
D) dependent upon the impact of this tax change on consumer disposable income.

Question 12

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

Accepted Answer

A) decreases;increases 
B) increases;decreases 
C) increases;increases 
D) decreases;decreases 
A) decreases;increases 
B) increases;decreases 
C) increases;increases 
D) decreases;decreases

Question 13

Part of the spending on the Doyle Drive project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

Accepted Answer

A) real GDP and employment. 
B) tax revenues and the federal budget surplus. 
C) disposable income and interest rates. 
D) the money supply and money demand. 
A) real GDP and employment. 
B) tax revenues and the federal budget surplus. 
C) disposable income and interest rates. 
D) the money supply and money demand.

Question 14

Figure 16-1  
-Refer to Figure 16-1.Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.If contractionary policy is used to move the economy back to long run equilibrium,this would be depicted as a movement from ________ using the static AD-AS model in the figure above.

Accepted Answer

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

Question 15

As the tax wedge associated with a given economic activity gets smaller,we would expect

Accepted Answer

A) more of that economic activity to occur. 
B) the distortions caused by taxes on that activity to be greater. 
C) people to engage in less of that particular activity. 
D) no change in the practice of that activity until the tax wedge ultimately disappears. 
A) more of that economic activity to occur. 
B) the distortions caused by taxes on that activity to be greater. 
C) people to engage in less of that particular activity. 
D) no change in the practice of that activity until the tax wedge ultimately disappears.

Question 16

President Bush lowered taxes on capital gains and dividends in 2003.Explain how this might increase aggregate supply.

Accepted Answer

A lender earns a capital gain if she pur

Question 17

Table 16-1
  
-Refer to Table 16-1.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy.If Congress and the president want to keep real GDP at its potential level in 2017,they should

Accepted Answer

A) decrease income taxes. 
B) decrease government purchases. 
C) decrease the money supply. 
D) increase the level of interest rates. 
A) decrease income taxes. 
B) decrease government purchases. 
C) decrease the money supply. 
D) increase the level of interest rates.

Question 18

The budget deficit increases during wars and recessions.

Accepted Answer

A) True 
 B)False

Question 19

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

Accepted Answer

A) True 
 B)False

Question 20

What is expansionary fiscal policy? What is contractionary fiscal policy?

Accepted Answer

An expansionary fiscal policy is a decre

The tax multiplier equals the change in divided by the change in .

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

In an open economy,the government purchases multiplier will be

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9,the tax rate equals 0.25,and the marginal propensity to import equals 0.15.

A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

Which of the following best describes supply-side economics?

Which of the following would increase the size of the government purchases multiplier?

Figure 16-8 -Refer to Figure 16-8.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?

During the Great Depression,what appeared to be fiscal policy was actually not when the budget deficit or surplus is examined.

Figure 16-1 -Refer to Figure 16-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Expansionary fiscal policy the price level and equilibrium real GDP.

Part of the spending on the Doyle Drive project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

As the tax wedge associated with a given economic activity gets smaller,we would expect

President Bush lowered taxes on capital gains and dividends in 2003.Explain how this might increase aggregate supply.

The budget deficit increases during wars and recessions.

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

What is expansionary fiscal policy? What is contractionary fiscal policy?

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

The tax multiplier equals the change in ________ divided by the change in ________.

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

In an open economy,the government purchases multiplier will be

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9,the tax rate equals 0.25,and the marginal propensity to import equals 0.15.

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Which of the following best describes supply-side economics?

Which of the following would increase the size of the government purchases multiplier?

Figure 16-8 -Refer to Figure 16-8.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?

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Figure 16-1 -Refer to Figure 16-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

Part of the spending on the Doyle Drive project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

As the tax wedge associated with a given economic activity gets smaller,we would expect

President Bush lowered taxes on capital gains and dividends in 2003.Explain how this might increase aggregate supply.

The budget deficit increases during wars and recessions.

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

What is expansionary fiscal policy? What is contractionary fiscal policy?

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

The tax multiplier equals the change in divided by the change in .

A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

During the Great Depression,what appeared to be fiscal policy was actually not when the budget deficit or surplus is examined.

Expansionary fiscal policy the price level and equilibrium real GDP.