Question 1

How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?

Accepted Answer

Expansionary monetary policy increases s

Question 2

Which of the following is an example of discretionary fiscal policy?

Accepted Answer

A) an increase in unemployment insurance payments during a recession 
B) an increase in income tax receipts with rising income during an expansion 
C) the tax cuts passed by Congress in 2001 to combat the recession 
D) a decrease in food stamps issued during an expansion or boom 
A) an increase in unemployment insurance payments during a recession 
B) an increase in income tax receipts with rising income during an expansion 
C) the tax cuts passed by Congress in 2001 to combat the recession 
D) a decrease in food stamps issued during an expansion or boom

Question 3

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

Accepted Answer

A) True 
 B)False

Question 4

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress should

Accepted Answer

A) lower government purchases by an amount less than $200 billion. 
B) lower government purchases by $200 billion. 
C) raise taxes by $200 billion. 
D) lower taxes by $200 billion. 
E) raise taxes by an amount more than $200 billion. 
A) lower government purchases by an amount less than $200 billion. 
B) lower government purchases by $200 billion. 
C) raise taxes by $200 billion. 
D) lower taxes by $200 billion. 
E) raise taxes by an amount more than $200 billion.

Question 5

A decrease in individual income taxes ________ disposable income,which ________ consumption spending.

Accepted Answer

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

Question 6

The government purchases multiplier is defined as

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 7

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Accepted Answer

First,changes in government purchases af

Question 8

Figure 16-5  
-Refer to Figure 16-5.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,and no fiscal or monetary policy is pursued,then at point B

Accepted Answer

A) the unemployment rate is very low. 
B) firms are operating below capacity. 
C) the economy is above full employment. 
D) income and profits are rising. 
E) there is pressure on wages and prices to rise. 
A) the unemployment rate is very low. 
B) firms are operating below capacity. 
C) the economy is above full employment. 
D) income and profits are rising. 
E) there is pressure on wages and prices to rise.

Question 9

The federal budget exhibited a $128.7 billion surplus in 2001 but moved to a deficit of $157.8 billion in 2002.Some argued the deficit was opened up because of the Bush 2001 tax cuts,but others argued that the deficit grew because of the recession suffered in 2001.Evaluate the validity of the second argument.

Accepted Answer

Recessions increase the federal budget d

Question 10

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

Accepted Answer

No,expansionary fiscal policy does not d

Question 11

The majority of the federal government debt is held by government agencies.

Accepted Answer

A) True 
 B)False

Question 12

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

Accepted Answer

A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion. 
A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion.

Question 13

The federal budget deficit acts as an automatic stabilizer because

Accepted Answer

A) government tax revenues decrease during a recession. 
B) unemployment insurance payments decrease during a recession. 
C) food stamp payments increase during expansionary periods. 
D) Medicaid payments increase during expansionary periods. 
A) government tax revenues decrease during a recession. 
B) unemployment insurance payments decrease during a recession. 
C) food stamp payments increase during expansionary periods. 
D) Medicaid payments increase during expansionary periods.

Question 14

The tax multiplier is calculated as "one minus the government purchases multiplier."

Accepted Answer

A) True 
 B)False

Question 15

Government deficits tend to increase during

Accepted Answer

A) recessions and booms. 
B) periods of war and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty. 
A) recessions and booms. 
B) periods of war and recession. 
C) periods of below- or above-average growth. 
D) periods of increased financial uncertainty.

Question 16

Assuming a fixed amount of taxes and a closed economy,calculate the value of the government purchases multiplier,the tax multiplier,and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

Accepted Answer

Government purchases multiplie

Question 17

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

Accepted Answer

A) less difficult than with monetary policy. 
B) far less difficult than with monetary policy. 
C) more difficult than with monetary policy. 
D) about the same difficulty as with monetary policy. 
A) less difficult than with monetary policy. 
B) far less difficult than with monetary policy. 
C) more difficult than with monetary policy. 
D) about the same difficulty as with monetary policy.

Question 18

In recent economic history,the U.S.federal budget was in surplus from

Accepted Answer

A) 2001 through 2005. 
B) 1998 through 2001. 
C) 1990 through 1997. 
D) 1980 through 1989. 
A) 2001 through 2005. 
B) 1998 through 2001. 
C) 1990 through 1997. 
D) 1980 through 1989.

Question 19

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut to

Accepted Answer

A) decrease both the price level and increase real GDP. 
B) increase both the price level and the level of real GDP. 
C) increase the level of real GDP. 
D) increase the price level. 
A) decrease both the price level and increase real GDP. 
B) increase both the price level and the level of real GDP. 
C) increase the level of real GDP. 
D) increase the price level.

Question 20

Table 16-5
  
-Refer to Table 16-5.The economy is in the state described by the table above.Draw the dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2,assuming that no policy is pursued.Then illustrate and explain the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing potential GDP.

Accepted Answer

@#IMG-DLM& The economy begins in equilibrium at po

How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?

Which of the following is an example of discretionary fiscal policy?

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress should

A decrease in individual income taxes disposable income,which consumption spending.

The government purchases multiplier is defined as

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Figure 16-5 -Refer to Figure 16-5.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,and no fiscal or monetary policy is pursued,then at point B

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

The majority of the federal government debt is held by government agencies.

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

The federal budget deficit acts as an automatic stabilizer because

The tax multiplier is calculated as "one minus the government purchases multiplier."

Government deficits tend to increase during

Assuming a fixed amount of taxes and a closed economy,calculate the value of the government purchases multiplier,the tax multiplier,and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

In recent economic history,the U.S.federal budget was in surplus from

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut 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

Filters

Exam 16: Fiscal Policy

How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?

Which of the following is an example of discretionary fiscal policy?

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress should

A decrease in individual income taxes ________ disposable income,which ________ consumption spending.

The government purchases multiplier is defined as

Describe the differences (in sign and relative magnitude)between the government purchases multiplier and the tax multiplier.

Figure 16-5 -Refer to Figure 16-5.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,and no fiscal or monetary policy is pursued,then at point B

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

The majority of the federal government debt is held by government agencies.

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

The federal budget deficit acts as an automatic stabilizer because

The tax multiplier is calculated as "one minus the government purchases multiplier."

Government deficits tend to increase during

Assuming a fixed amount of taxes and a closed economy,calculate the value of the government purchases multiplier,the tax multiplier,and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

In recent economic history,the U.S.federal budget was in surplus from

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut 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

Filters

A decrease in individual income taxes disposable income,which consumption spending.