Question 1

Transfer payments are income that is

Accepted Answer

A)  earned but not received.
B)  received but not spent.
C)  spent but not earned.
D)  received but not earned.

Question 2

Which of the following is not a method to reduce the inflationary gap?

Accepted Answer

A)  Increasing government spending 
B)  Reducing transfer payments 
C)  Raising taxes 
D)  Decreasing government expenditure

Question 3

Appropriate fiscal policy in the U.S.in 2009 would attempt to

Accepted Answer

A)  increase taxes.
B)  decrease aggregate supply.
C)  increase aggregate demand.
D)  decrease aggregate demand.

Question 4

The reason that the multiplier is smaller if there are variable taxes is that

Accepted Answer

A)  taxes add to government spending, which increases income.
B)  people get angry about taxes and decide to work less.
C)  tax increases shift the expenditure line upward.
D)  part of an increase in income is taken away in taxes.

Question 5

Personal income taxes and corporate income taxes are examples of ____ taxes.

Accepted Answer

A)  variable 
B)  sales 
C)  fixed 
D)  disposable

Question 6

The fiscal policy planner's job is made easier because full-employment GDP can be accurately measured.

Accepted Answer

A) True 
 B)False

Question 7

The primary reason why the oversimplified formula​ overstates the multiplier is that it ignores price-level changes, which reduce the multiplier.

Accepted Answer

A) True 
 B)False

Question 8

When you compare the effects of government spending on aggregate demand with the effects of taxes on aggregate demand, the effects of government spending are

Accepted Answer

A)  smaller.
B)  larger.
C)  the same.
D)  impossible to predict.

Question 9

Why did President Obama want to repeal the Bush era tax cuts on upper income taxpayers?
 How would the repeal of these tax cuts impact aggregate demand and to what degree?
 How did the economic conditions in 2010 make such a repeal less likely to take place?

Accepted Answer

President Obama wanted to repeal the Bus...

Question 10

Once the expenditure schedule has been adjusted for tax levels, the determination of equilibrium GDP

Accepted Answer

A)  is no longer possible.
B)  becomes much more difficult.
C)  proceeds exactly as before.
D)  requires a higher multiplier value.

Question 11

Explain why a change in income tax rates causes the consumption schedule to change slope.

Accepted Answer

An income tax rate determines the portio...

Question 12

To eliminate an inflationary gap, the aggregate demand curve should

Accepted Answer

A)  shift outward.
B)  become vertical.
C)  become horizontal.
D)  shift inward.

Question 13

Supply-side tax cuts designed to increase investment spending are attractive in theory, but in practice

Accepted Answer

A)  the effect is the opposite of what theory suggests.
B)  are less useful, because they take a long time to increase the capital stock.
C)  they have no effect on the capital stock in the short or long run.
D)  are powerful in the short run as capital stock rapidly increases, but the effect tapers off in the long run.

Question 14

An active stabilization policy designed to limit the size of government would

Accepted Answer

A)  raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap.
B)  raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary gap.
C)  reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary gap.
D)  reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary gap.

Question 15

Conservatives usually favor increasing government spending to increase aggregate demand.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements would appeal to someone who favors an expanded public sector as the basis of expansionary fiscal policy?

Accepted Answer

A)  "The government isn't the solution; it's the problem." 
B)  "The government that governs least governs best." 
C)  "The American people want national defense; they want laws to be enforced; they want federal support for education and environmental protection, and they want transfer payments for the elderly and unemployed." 
D)  "If you ever got anything good out of the government you can be sure that some rich so-and-so got more."

Question 17

President Clinton, at the beginning of his administration, increased personal income taxes on individuals with relatively high incomes.How will this change the consumption schedule?

Accepted Answer

A)  It will shift and become steeper.
B)  It will shift and become flatter.
C)  It will shift in a parallel manner.
D)  It will remain fixed as the economy moves along the schedule.

Question 18

If a "liberal" wanted to increase aggregate demand, which of the following would she tend to favor?

Accepted Answer

A)  An increase in government spending, because it will increase the size of the public sector.
B)  A decrease in transfer payments, because it keeps the public sector small.
C)  An increase in transfer payments, because it has a larger multiplier than tax changes.
D)  A decrease in taxes, because it makes the public sector smaller.

Question 19

Government spending influences spending indirectly.

Accepted Answer

A) True 
 B)False

Question 20

Why did President George W.Bush feel the need for a stimulus package for the U.S.economy after September 11, 2001?
 As a conservative, what type of fiscal stimulus would be most appealing to President Bush?

Accepted Answer

The decline in real GDP and the existenc...

Exam 28: Managing Aggregate Demand: Fiscal Policy

The reason that the multiplier is smaller if there are variable taxes is that

Correct AnswerverifiedShow Answer

President Clinton, at the beginning of his administration, increased personal income taxes on individuals with relatively high incomes.How will this change the consumption schedule?

Correct AnswerverifiedShow Answer

Which of the following statements would appeal to someone who favors an expanded public sector as the basis of expansionary fiscal policy?

Correct AnswerverifiedShow Answer

Government spending influences spending indirectly.

Correct AnswerverifiedShow Answer

Transfer payments are income that is

Correct AnswerverifiedShow Answer

Why did President Obama want to repeal the Bush era tax cuts on upper income taxpayers? How would the repeal of these tax cuts impact aggregate demand and to what degree? How did the economic conditions in 2010 make such a repeal less likely to take place?

Correct AnswerverifiedPresident Obama wanted to repeal the Bus...View AnswerShow Answer

Appropriate fiscal policy in the U.S.in 2009 would attempt to

Correct AnswerverifiedShow Answer

Supply-side tax cuts designed to increase investment spending are attractive in theory, but in practice

Correct AnswerverifiedShow Answer

The fiscal policy planner's job is made easier because full-employment GDP can be accurately measured.

Correct AnswerverifiedShow Answer

The primary reason why the oversimplified formula​ overstates the multiplier is that it ignores price-level changes, which reduce the multiplier.

Correct AnswerverifiedShow Answer

Personal income taxes and corporate income taxes are examples of ____ taxes.

Correct AnswerverifiedShow Answer

When you compare the effects of government spending on aggregate demand with the effects of taxes on aggregate demand, the effects of government spending are

Correct AnswerverifiedShow Answer

To eliminate an inflationary gap, the aggregate demand curve should

Correct AnswerverifiedShow Answer

Which of the following is not a method to reduce the inflationary gap?

Correct AnswerverifiedShow Answer

Why did President George W.Bush feel the need for a stimulus package for the U.S.economy after September 11, 2001? As a conservative, what type of fiscal stimulus would be most appealing to President Bush?

Correct AnswerverifiedThe decline in real GDP and the existenc...View AnswerShow Answer

Conservatives usually favor increasing government spending to increase aggregate demand.

Correct AnswerverifiedShow Answer

An active stabilization policy designed to limit the size of government would

Correct AnswerverifiedShow Answer

Explain why a change in income tax rates causes the consumption schedule to change slope.

Correct AnswerverifiedAn income tax rate determines the portio...View AnswerShow Answer

Once the expenditure schedule has been adjusted for tax levels, the determination of equilibrium GDP

Correct AnswerverifiedShow Answer

If a "liberal" wanted to increase aggregate demand, which of the following would she tend to favor?

Correct AnswerverifiedShow Answer

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President Obama wanted to repeal the Bus...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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The primary reason why the oversimplified formula overstates the multiplier is that it ignores price-level changes, which reduce the multiplier.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The decline in real GDP and the existenc...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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An income tax rate determines the portio...
View Answer

Correct Answer
verified

Correct Answer
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