Question 1

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

Accepted Answer

A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than 
A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than

Question 2

An increase in the sensitivity of private spending (consumption,investment,and net exports)to changes in the interest rate ________ the government purchases multiplier.

Accepted Answer

A) will decrease 
B) will increase 
C) will not change 
D) may increase or may decrease 
A) will decrease 
B) will increase 
C) will not change 
D) may increase or may decrease

Question 3

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately ________ took the form of tax cuts and ________ took the form of increases in government expenditures.

Accepted Answer

A) one-half;one-half 
B) three-fourths;one-fourth 
C) one-tenth;nine-tenths 
D) one-third;two-thirds 
A) one-half;one-half 
B) three-fourths;one-fourth 
C) one-tenth;nine-tenths 
D) one-third;two-thirds

Question 4

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

Accepted Answer

A) automatic stabilizers. 
B) discretionary fiscal policy. 
C) discretionary monetary policy. 
D) automatic monetary policy. 
A) automatic stabilizers. 
B) discretionary fiscal policy. 
C) discretionary monetary policy. 
D) automatic monetary policy.

Question 5

Expansionary fiscal policy involves

Accepted Answer

A) increasing government purchases or decreasing taxes. 
B) increasing taxes or decreasing government purchases. 
C) increasing the money supply and decreasing interest rates. 
D) decreasing the money supply and increasing interest rates. 
A) increasing government purchases or decreasing taxes. 
B) increasing taxes or decreasing government purchases. 
C) increasing the money supply and decreasing interest rates. 
D) decreasing the money supply and increasing interest rates.

Question 6

Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016.It also raises taxes by $1 billion to keep the deficit from growing.If the marginal propensity to consume is 0.9,what is the effect on equilibrium GDP?

Accepted Answer

A) GDP does not change. 
B) GDP increases by $10 billion. 
C) GDP increases by $900,000. 
D) GDP increases by $1 billion. 
A) GDP does not change. 
B) GDP increases by $10 billion. 
C) GDP increases by $900,000. 
D) GDP increases by $1 billion.

Question 7

The largest source of federal government revenue in 2014 was

Accepted Answer

A) sales taxes. 
B) corporate income taxes. 
C) individual income taxes. 
D) payroll taxes to fund Social Security and Medicare programs. 
A) sales taxes. 
B) corporate income taxes. 
C) individual income taxes. 
D) payroll taxes to fund Social Security and Medicare programs.

Question 8

Lowering the individual income tax rate will increase household disposable income and consumption spending.

Accepted Answer

A) True 
 B)False

Question 9

A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008.

Accepted Answer

A) increase;more 
B) increase;less 
C) decrease;more 
D) decrease;less 
A) increase;more 
B) increase;less 
C) decrease;more 
D) decrease;less

Question 10

An increase in government spending increases the supply of money in our economy.

Accepted Answer

A) True 
 B)False

Question 11

During the twentieth century,the largest budget deficits as a percentage of GDP occurred

Accepted Answer

A) during the 1990s. 
B) during the 1980s. 
C) during the Vietnam war. 
D) during World Wars I and II. 
A) during the 1990s. 
B) during the 1980s. 
C) during the Vietnam war. 
D) during World Wars I and II.

Question 12

Figure 16-11  
-Refer to Figure 16-11.In the graph above,the shift from AD1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Accepted Answer

A) would be equal to 
B) would be greater than 
C) would be less than 
D) may be greater than or less than 
A) would be equal to 
B) would be greater than 
C) would be less than 
D) may be greater than or less than

Question 13

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

Accepted Answer

A) multiplier 
B) expenditure 
C) consumption 
D) aggregate demand 
A) multiplier 
B) expenditure 
C) consumption 
D) aggregate demand

Question 14

From an initial long-run equilibrium,if aggregate demand grows more slowly than long-run and short-run aggregate supply,then Congress and the president would most likely

Accepted Answer

A) increase the required reserve ratio and decrease government spending. 
B) decrease government spending. 
C) decrease oil prices. 
D) decrease taxes. 
E) lower interest rates. 
A) increase the required reserve ratio and decrease government spending. 
B) decrease government spending. 
C) decrease oil prices. 
D) decrease taxes. 
E) lower interest rates.

Question 15

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.

Accepted Answer

A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than 
A) by less than 
B) by more than 
C) by the same amount as 
D) sometimes by more than and other times by less than

Question 16

How can tax simplification be beneficial to the economy?

Accepted Answer

Tax simplification would free up resourc

Question 17

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

Accepted Answer

A) equal 
B) be less than 
C) be more than 
D) There is insufficient information given here to draw a conclusion. 
A) equal 
B) be less than 
C) be more than 
D) There is insufficient information given here to draw a conclusion.

Question 18

The total value of U.S.Treasury bonds outstanding equals

Accepted Answer

A) the federal government deficit. 
B) the federal government surplus. 
C) the federal government debt. 
D) the cyclically adjusted budget deficit. 
A) the federal government deficit. 
B) the federal government surplus. 
C) the federal government debt. 
D) the cyclically adjusted budget deficit.

Question 19

An increase in government purchases will increase aggregate demand because

Accepted Answer

A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand. 
A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand.

Question 20

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

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

An increase in the sensitivity of private spending (consumption,investment,and net exports)to changes in the interest rate ________ the government purchases multiplier.

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately took the form of tax cuts and took the form of increases in government expenditures.

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

Expansionary fiscal policy involves

Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016.It also raises taxes by $1 billion to keep the deficit from growing.If the marginal propensity to consume is 0.9,what is the effect on equilibrium GDP?

The largest source of federal government revenue in 2014 was

Lowering the individual income tax rate will increase household disposable income and consumption spending.

A permanent tax cut would likely consumption spending than would a tax rebate like the one issued in 2008.

An increase in government spending increases the supply of money in our economy.

During the twentieth century,the largest budget deficits as a percentage of GDP occurred

Figure 16-11 -Refer to Figure 16-11.In the graph above,the shift from AD1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

From an initial long-run equilibrium,if aggregate demand grows more slowly than long-run and short-run aggregate supply,then Congress and the president would most likely

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.

How can tax simplification be beneficial to the economy?

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

The total value of U.S.Treasury bonds outstanding equals

An increase in government purchases will increase aggregate demand because

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,Congress and the president would most likely pursue

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 aggregate demand curve will shift to the right ________ the initial decrease in taxes.

An increase in the sensitivity of private spending (consumption,investment,and net exports)to changes in the interest rate ________ the government purchases multiplier.

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately ________ took the form of tax cuts and ________ took the form of increases in government expenditures.

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

Expansionary fiscal policy involves

Suppose that Congress allocates $1 billion to clean up after hurricanes in 2016.It also raises taxes by $1 billion to keep the deficit from growing.If the marginal propensity to consume is 0.9,what is the effect on equilibrium GDP?

The largest source of federal government revenue in 2014 was

Lowering the individual income tax rate will increase household disposable income and consumption spending.

A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008.

An increase in government spending increases the supply of money in our economy.

During the twentieth century,the largest budget deficits as a percentage of GDP occurred

Figure 16-11 -Refer to Figure 16-11.In the graph above,the shift from AD1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

From an initial long-run equilibrium,if aggregate demand grows more slowly than long-run and short-run aggregate supply,then Congress and the president would most likely

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.

How can tax simplification be beneficial to the economy?

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion.An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

The total value of U.S.Treasury bonds outstanding equals

An increase in government purchases will increase aggregate demand because

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,Congress and the president would most likely pursue

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

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately took the form of tax cuts and took the form of increases in government expenditures.

A permanent tax cut would likely consumption spending than would a tax rebate like the one issued in 2008.