A tax cut is designed to stimulate spending during a recession.
0%
Shift the aggregate demand curve to the right.
0%
Periods of war and recession.
Q.2.
Which of the following is an appropriate discretionary fiscal policy if equilibrium real GDP falls below potential real GDP?
0%
An increase in government purchases
0%
A significant increase in inflation.
0%
An increase in taxes.
0%
An increase in government purchases.
Q.3.
Which of the following would be considered a fiscal policy action?
0%
Periods of war and recession.
0%
interest on the national debt, grants to state and local governments, and transfer payments.
0%
A tax cut is designed to stimulate spending during a recession.
0%
Congress increases the income tax rate.
Q.4.
If the economy is falling below potential real GDP, which would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply?
0%
An increase in government purchases.
0%
a $300 billion decrease in GDP
0%
a decrease of less than $80 billion
0%
An increase in taxes.
Q.5.
The government purchases multiplier equals the change in ________ divided by the change in ________.
0%
A significant increase in inflation.
0%
equilibrium real GDP; government purchases
0%
equilibrium real GDP; taxes
0%
private expenditures; government purchases
Q.6.
During 1970−1997, the U.S. federal government was
0%
A budget surplus results.
0%
Rises because of programs such as unemployment insurance and Medicaid.
0%
individual income taxes.
0%
In deficit every year.
Q.7.
Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be _________.
0%
taxes; expenditures
0%
Increasing government purchases or decreasing taxes.
0%
lower; lower
0%
higher; higher
Q.8.
Suppose the government spending multiplier isThe federal government cuts spending by $40 billion. What is the change in GDP if the price level is not held constant?
0%
a decrease of less than $80 billion
0%
less than $500 billion.
0%
An increase in taxes.
0%
decrease; rise; fall
Q.9.
Crowding out, following an increase in government spending, results from (the exchange rate is the foreign exchange price of the domestic currency)
0%
higher interest rates and higher exchange rates.
0%
equilibrium real GDP; government purchases
0%
decrease taxes to increase consumer disposable income.
0%
private expenditures; government purchases
Q.10.
Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, Congress and the president would need to increase government purchases by
0%
automatic stabilizers.
0%
More than $200 billion.
0%
a decrease of less than $80 billion
0%
less than $500 billion.
Q.11.
Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
0%
higher; higher
0%
Shift the aggregate demand curve to the right.
0%
taxes; expenditures
0%
lower; lower
Q.12.
Expansionary fiscal policy involves
0%
Increasing government purchases or decreasing taxes.
0%
higher; higher
0%
Shift the aggregate demand curve to the right.
0%
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
Q.13.
Which of the following would be classified as fiscal policy?
0%
decrease taxes to increase consumer disposable income.
0%
The federal government cuts taxes to stimulate the economy.
0%
A significant increase in inflation.
0%
The total value of U.S. Treasury bonds outstanding.
Q.14.
Automatic stabilizers refer to
0%
government spending and taxes that automatically increase or decrease along with the business cycle.
0%
have risen from 25 percent to about 48 percent of federal government expenditures.
0%
The total value of U.S. Treasury bonds outstanding.
0%
more sensitive consumption, investment, and net exports are to changes in interest rates.
Q.15.
The federal government debt as a percentage of GDP fell
0%
The total value of U.S. Treasury bonds outstanding.
0%
individual income taxes.
0%
From 1998-2001.
0%
transfer payments.
Q.16.
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.
0%
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
0%
higher; higher
0%
lower; lower
0%
taxes; expenditures
Q.17.
An increase in the sensitivity of private spending (consumption, investment, and net exports) to changes in the interest rate ________ the government purchases multiplier.
0%
will decrease.
0%
- Make domestic businesses less competitive in international markets as the dollar appreciates in value.- Raise interest rates and reduce consumer expenditures on automobiles and new houses.- Reduce investment in new capital.
0%
More than $200 billion.
0%
automatic stabilizers.
Q.18.
Crowding out refers to a decline in ________ as a result of an increase in ________.
0%
private expenditures; government purchases
0%
equilibrium real GDP; taxes
0%
equilibrium real GDP; government purchases
0%
more sensitive consumption, investment, and net exports are to changes in interest rates.
Q.19.
The federal government debt equals
0%
decrease taxes to increase consumer disposable income.
0%
equilibrium real GDP; government purchases
0%
The total value of U.S. Treasury bonds outstanding.
0%
From 1998-2001.
Q.20.
If the federal government's expenditures are less than its tax revenues, then
0%
transfer payments.
0%
An increase in government purchases.
0%
equilibrium real GDP; taxes
0%
A budget surplus results.
Q.21.
An increase in government spending may expedite recovery from a recession in the short run, but in the long-run, this policy may
0%
- Make domestic businesses less competitive in international markets as the dollar appreciates in value.- Raise interest rates and reduce consumer expenditures on automobiles and new houses.- Reduce investment in new capital.
0%
More than $200 billion.
0%
automatic stabilizers.
0%
decrease taxes to increase consumer disposable income.
Q.22.
If the tax multiplier is minus−1.5 and a $200 billion tax increase is implemented, what is the change in GDP, holding all else constant?
0%
equilibrium real GDP; taxes
0%
An increase in government purchases.
0%
a $300 billion decrease in GDP
0%
An increase in government purchases
Q.23.
The three categories of federal government expenditures, in addition to government purchases, are
0%
Increasing government purchases or decreasing taxes.
0%
Shift the aggregate demand curve to the right.
0%
lower; lower
0%
interest on the national debt, grants to state and local governments, and transfer payments.
Q.24.
An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by
0%
will decrease.
0%
increase; fall; rise
0%
less than $500 billion.
0%
More than $200 billion.
Q.25.
During recessions, government expenditure automatically
0%
private expenditures; government purchases
0%
The federal government cuts taxes to stimulate the economy.
0%
Rises because of programs such as unemployment insurance and Medicaid.
0%
In deficit every year.
Q.26.
A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments _________.
0%
a decrease of less than $80 billion
0%
An increase in government purchases.
0%
increase; fall; rise
0%
automatic stabilizers.
Q.27.
To combat a recession with discretionary fiscal policy, Congress and the president should
0%
decrease taxes to increase consumer disposable income.
0%
private expenditures; government purchases
0%
a decrease of less than $80 billion
0%
more sensitive consumption, investment, and net exports are to changes in interest rates.
Q.28.
The tax multiplier equals the change in ________ divided by the change in ________.
0%
equilibrium real GDP; government purchases
0%
equilibrium real GDP; taxes
0%
a $300 billion decrease in GDP
0%
individual income taxes.
Q.29.
Fiscal policy refers to changes in
0%
Shift the aggregate demand curve to the right.
0%
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
0%
Increasing government purchases or decreasing taxes.
0%
lower; lower
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