Question 1

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Accepted Answer

A) True 
 B)False

Question 2

Compared to the averages for post World War II recessions,the recession of 2007-2009 was ________ in duration and the decline in real GDP was ________.

Accepted Answer

A) longer;greater 
B) longer;smaller 
C) shorter;greater 
D) shorter;smaller 
A) longer;greater 
B) longer;smaller 
C) shorter;greater 
D) shorter;smaller

Question 3

A one-time tax rebate,which is not expected to be extended in future years,will

Accepted Answer

A) have a moderately positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand,with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand. 
A) have a moderately positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand,with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand.

Question 4

The three categories of federal government expenditures,in addition to government purchases,are

Accepted Answer

A) interest on the national debt,grants to state and local governments,and transfer payments. 
B) interest on the national debt,defense spending,and transfer payments. 
C) defense spending,budgets of federal agencies,and transfer payments. 
D) defense spending,Social Security,and Medicare. 
A) interest on the national debt,grants to state and local governments,and transfer payments. 
B) interest on the national debt,defense spending,and transfer payments. 
C) defense spending,budgets of federal agencies,and transfer payments. 
D) defense spending,Social Security,and Medicare.

Question 5

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

Accepted Answer

A) GDP does not change. 
B) GDP increases by $25 billion. 
C) GDP increases by $4 billion. 
D) GDP increases by $5 billion. 
A) GDP does not change. 
B) GDP increases by $25 billion. 
C) GDP increases by $4 billion. 
D) GDP increases by $5 billion.

Question 8

Suppose the president is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Accepted Answer

A) There is a $20 billion increase in equilibrium GDP. 
B) There is a $20 billion decrease in equilibrium GDP. 
C) There is a $15 billion increase in equilibrium GDP. 
D) There is a $15 billion decrease in equilibrium GDP. 
A) There is a $20 billion increase in equilibrium GDP. 
B) There is a $20 billion decrease in equilibrium GDP. 
C) There is a $15 billion increase in equilibrium GDP. 
D) There is a $15 billion decrease in equilibrium GDP.

Question 9

Figure 16-2  
-Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by Congress and the president would be to

Accepted Answer

A) lower the discount rate of interest. 
B) execute an open market sale of government securities. 
C) increase government transfer payments. 
D) increase marginal income tax rates. 
A) lower the discount rate of interest. 
B) execute an open market sale of government securities. 
C) increase government transfer payments. 
D) increase marginal income tax rates.

Question 10

An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

Accepted Answer

A) True 
 B)False

Question 11

If Congress passed a one-time tax cut in order to stimulate the economy in 2014,and tax rate levels returned to their pre-2014 level in 2015,how should this tax cut affect the economy?

Accepted Answer

A) The tax cut would increase consumption spending less than would a permanent tax cut. 
B) The tax cut would increase consumption spending more than would a permanent tax cut. 
C) The tax cut would increase consumption spending by the same amount as would a permanent tax cut. 
D) The tax cut would lower the price level in 2014. 
A) The tax cut would increase consumption spending less than would a permanent tax cut. 
B) The tax cut would increase consumption spending more than would a permanent tax cut. 
C) The tax cut would increase consumption spending by the same amount as would a permanent tax cut. 
D) The tax cut would lower the price level in 2014.

Question 12

What is the "tax wedge"?

Accepted Answer

The "tax wedge" is t

Question 13

The larger the marginal propensity to import,the larger the government purchases multiplier.

Accepted Answer

A) True 
 B)False

Question 14

The multiplier effect refers to the series of

Accepted Answer

A) autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B) induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C) autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D) induced increases in investment spending that result from an initial increase in autonomous expenditures. 
A) autonomous increases in consumption spending that result from an initial increase in induced expenditures. 
B) induced increases in consumption spending that result from an initial increase in autonomous expenditures. 
C) autonomous increases in investment spending that result from an initial increase in induced expenditures. 
D) induced increases in investment spending that result from an initial increase in autonomous expenditures.

Question 15

Forecasts by the Congressional Budget Office show spending on Social Security,Medicare,and Medicaid rising from 10.1 percent of GDP in 2015 to ________ percent of GDP in 2090,and by 2090 the federal government will be spending,as a fraction of GDP,________ on these three programs as it currently spends on all programs combined.

Accepted Answer

A) 16.2 percent;nearly as much 
B) 16.2 percent;half as much 
C) 19.8 percent;nearly as much 
D) 19.8 percent;half as much 
A) 16.2 percent;nearly as much 
B) 16.2 percent;half as much 
C) 19.8 percent;nearly as much 
D) 19.8 percent;half as much

Question 16

The crowding out of private spending by government spending will be greater the

Accepted Answer

A) less sensitive consumption,investment,and net exports are to changes in interest rates. 
B) more sensitive consumption,investment,and net exports are to changes in interest rates. 
C) less sensitive consumption,investment,and net exports are to changes in the price level. 
D) more sensitive consumption,investment,and net exports are to changes in the price level. 
A) less sensitive consumption,investment,and net exports are to changes in interest rates. 
B) more sensitive consumption,investment,and net exports are to changes in interest rates. 
C) less sensitive consumption,investment,and net exports are to changes in the price level. 
D) more sensitive consumption,investment,and net exports are to changes in the price level.

Question 17

Federal government expenditures,as a percentage of GDP,

Accepted Answer

A) have risen since the early 1950s to the present. 
B) have fallen since the early 1950s to the present. 
C) rose from 1950 to 1991,fell from 1992 to 2001,and have risen from 2001 to the present. 
D) rose from 1950 to 2001 and then fell from 2001 to the present. 
E) rose from 1950 to 1980,fell from 1981 to 2001,and have risen from 2001 to the present. 
A) have risen since the early 1950s to the present. 
B) have fallen since the early 1950s to the present. 
C) rose from 1950 to 1991,fell from 1992 to 2001,and have risen from 2001 to the present. 
D) rose from 1950 to 2001 and then fell from 2001 to the present. 
E) rose from 1950 to 1980,fell from 1981 to 2001,and have risen from 2001 to the present.

Question 18

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Accepted Answer

A) rose;fell;risen 
B) fell;fell;risen 
C) rose;rose;fallen 
D) fell;rose;fallen 
A) rose;fell;risen 
B) fell;fell;risen 
C) rose;rose;fallen 
D) fell;rose;fallen

Question 19

Refer to the Article Summary.When does the Treasury Department borrow? Why would the Treasury have to borrow more than it estimated,as was indicated by its letter to Congress to raise the debt ceiling? When would the Treasury repay what it borrowed,and who is it repaying?

Accepted Answer

When tax revenues are not sufficient to

Question 20

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability,high rates of economic growth,and high employment.

Accepted Answer

A) taxes;interest rates 
B) taxes;the money supply 
C) interest rates;money supply 
D) taxes;expenditures 
A) taxes;interest rates 
B) taxes;the money supply 
C) interest rates;money supply 
D) taxes;expenditures

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Compared to the averages for post World War II recessions,the recession of 2007-2009 was in duration and the decline in real GDP was .

A one-time tax rebate,which is not expected to be extended in future years,will

The three categories of federal government expenditures,in addition to government purchases,are

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

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,and no fiscal or monetary policy is pursued,then at point B

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

Suppose the president is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Figure 16-2 -Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by Congress and the president would be to

An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

If Congress passed a one-time tax cut in order to stimulate the economy in 2014,and tax rate levels returned to their pre-2014 level in 2015,how should this tax cut affect the economy?

What is the "tax wedge"?

The larger the marginal propensity to import,the larger the government purchases multiplier.

The multiplier effect refers to the series of

The crowding out of private spending by government spending will be greater the

Federal government expenditures,as a percentage of GDP,

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.

Refer to the Article Summary.When does the Treasury Department borrow? Why would the Treasury have to borrow more than it estimated,as was indicated by its letter to Congress to raise the debt ceiling? When would the Treasury repay what it borrowed,and who is it repaying?

Fiscal policy is defined as changes in federal and to achieve macroeconomic objectives such as price stability,high rates of economic growth,and high employment.

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 government purchases multiplier will be larger if the marginal income tax rate decreases.

Compared to the averages for post World War II recessions,the recession of 2007-2009 was ________ in duration and the decline in real GDP was ________.

A one-time tax rebate,which is not expected to be extended in future years,will

The three categories of federal government expenditures,in addition to government purchases,are

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

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,and no fiscal or monetary policy is pursued,then at point B

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

Suppose the president is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Figure 16-2 -Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by Congress and the president would be to

An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

If Congress passed a one-time tax cut in order to stimulate the economy in 2014,and tax rate levels returned to their pre-2014 level in 2015,how should this tax cut affect the economy?

What is the "tax wedge"?

The larger the marginal propensity to import,the larger the government purchases multiplier.

The multiplier effect refers to the series of

The crowding out of private spending by government spending will be greater the

Federal government expenditures,as a percentage of GDP,

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Refer to the Article Summary.When does the Treasury Department borrow? Why would the Treasury have to borrow more than it estimated,as was indicated by its letter to Congress to raise the debt ceiling? When would the Treasury repay what it borrowed,and who is it repaying?

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability,high rates of economic growth,and high employment.

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

Compared to the averages for post World War II recessions,the recession of 2007-2009 was in duration and the decline in real GDP was .

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.

Fiscal policy is defined as changes in federal and to achieve macroeconomic objectives such as price stability,high rates of economic growth,and high employment.