Question 1

If the government increased taxes by $400,and the GDP decreased $600 as a result,the MPC must be:

Accepted Answer

A)  0.60.
B)  0.75.
C)  -0.60.
D)  1.5.

Question 2

Johnny has been working a lot of overtime during the most current economic boom.As a result,his income is high enough for him to move from the 10 percent tax bracket to the 15 percent tax bracket.So,Johnny pays a higher percentage of a higher income to the government this year.The increased amount paid to the government is an example of:

Accepted Answer

A)  discretionary fiscal policy slowing the economy.
B)  automatic stabilizers slowing the economy.
C)  discretionary fiscal policy encouraging economic activity.
D)  automatic stabilizers encouraging economic activity.

Question 3

Automatic stabilizers are the:

Accepted Answer

A)  taxes and government spending that affect fiscal policy without specific action from policymakers.
B)  fiscal policies that government actively chooses to adopt.
C)  expansionary fiscal policies.
D)  Keynesian policies.

Question 4

Ricardian equivalence predicts:

Accepted Answer

A)  that if governments cut taxes but not spending,people will not change their behavior.
B)  if people perceive current tax cuts to mean higher tax payments in the future,the cuts will have little expansionary effect.
C)  the consumers need to feel as though they will not have to pay in the future for current spending to make current tax cuts effective expansionary policy.
D)  All of these are true.

Question 5

The direct cost of debt depends on:

Accepted Answer

A)  the interest rate.
B)  fiscal policy.
C)  the implementation lag.
D)  the amount of the deficit.

Question 6

Fiscal policy is:

Accepted Answer

A)  government decisions about the level of taxation and public spending.
B)  congressional budget office decisions.
C)  the decisions that affect the available money supply in the economy.
D)  government decisions about the level of the interest rate in the economy.

Question 7

The total amount of money that a government owes is called:

Accepted Answer

A)  a budget deficit.
B)  a budget surplus.
C)  national debt.
D)  national surplus.

Question 8

Rising unemployment and decreased business confidence could be signs that the economy is at the start of a(n) :

Accepted Answer

A)  recession.
B)  boom.
C)  recovery.
D)  expansion.

Question 9

If the government undertakes expansionary fiscal policy,it might:

Accepted Answer

A)  increase income taxes.
B)  decrease income taxes.
C)  decrease government spending.
D)  increase corporate income taxes.

Question 10

Economists usually suggest that the best way to examine the deficit is by expressing it:

Accepted Answer

A)  as a percentage of GDP.
B)  in real terms.
C)  in nominal terms.
D)  None of these is true.

Question 11

The government-spending multiplier tells us:

Accepted Answer

A)  the amount by which GDP increases when government spending increases by $1.
B)  the amount by which GDP decreases when government increases its spending on capital goods by $1.
C)  the fraction of each dollar that will increase GDP of each dollar spent by the government.
D)  the amount by which government spending increases when GDP increases by $1.

Question 12

Economist John Maynard Keynes once said,"In the long run,we are all dead." Keynes was likely:

Accepted Answer

A)  in favor of using fiscal policy.
B)  against the use of fiscal policy.
C)  in favor of allowing the economy to always correct itself.
D)  None of these statements is true.

Question 13

Consumption depends on:

Accepted Answer

A)  total income.
B)  disposable income.
C)  pre-tax income.
D)  Consumption is unrelated to income.

Question 14

If the MPC were to increase from 0.75 to 0.8,then the government spending multiplier would:

Accepted Answer

A)  increase from 4 to 5.
B)  decrease from 5 to 4.
C)  increase from 0.2 to 0.25.
D)  decrease from 1.25 to 1.2.

Question 15

Keynesian policy:

Accepted Answer

A)  refers to policies that actively shift aggregate demand in an effort to reach full employment.
B)  refers to fiscal policy.
C)  promotes spending more and taxing less to boost economic activity to potential GDP.
D)  All of these are true.

Question 16

Fiscal policy that the government actively chooses to adopt is called:

Accepted Answer

A)  automatic stabilizing policy.
B)  discretionary fiscal policy.
C)  monetary policy.
D)  contractionary policy.

Question 17

If interest rates increase,the government debt becomes:

Accepted Answer

A)  more expensive to pay.
B)  less expensive to pay.
C)  more volatile.
D)  less of a burden.

Question 18

If the government were to increase its spending,it would expect:

Accepted Answer

A)  aggregate demand to shift to the right.
B)  aggregate demand to shift to the left.
C)  aggregate supply to shift to the right.
D)  aggregate supply to shift to the left.

Question 19

A budget deficit is:

Accepted Answer

A)  the amount of money a government spends beyond the net revenue it brings in.
B)  the amount of net revenue a government brings in beyond what it spends.
C)  the total amount of money that a government owes.
D)  the total amount of money that a government is owed.

Question 20

If the government wishes to increase GDP by $1,200b,and the MPC is 0.8,it should:

Accepted Answer

A)  increase taxes by $240b.
B)  decrease taxes by $240b.
C)  increase taxes by $300b.
D)  decrease taxes by $300b.

Exam 29: Fiscal Policy

If the government were to increase its spending,it would expect:

Correct Answer
verified

Economist John Maynard Keynes once said,"In the long run,we are all dead." Keynes was likely:

Correct Answer
verified

Economists usually suggest that the best way to examine the deficit is by expressing it:

Correct Answer
verified

Correct Answer
verified

Fiscal policy that the government actively chooses to adopt is called:

Correct Answer
verified

If the government increased taxes by $400,and the GDP decreased $600 as a result,the MPC must be:

Correct Answer
verified

The government-spending multiplier tells us:

Correct Answer
verified

The total amount of money that a government owes is called:

Correct Answer
verified

Rising unemployment and decreased business confidence could be signs that the economy is at the start of a(n) :

Correct Answer
verified

Consumption depends on:

Correct Answer
verified

Keynesian policy:

Correct Answer
verified

If the government wishes to increase GDP by $1,200b,and the MPC is 0.8,it should:

Correct Answer
verified

If the government undertakes expansionary fiscal policy,it might:

Correct Answer
verified

If interest rates increase,the government debt becomes:

Correct Answer
verified

Automatic stabilizers are the:

Correct Answer
verified

Fiscal policy is:

Correct Answer
verified

A budget deficit is:

Correct Answer
verified

The direct cost of debt depends on:

Correct Answer
verified

If the MPC were to increase from 0.75 to 0.8,then the government spending multiplier would:

Correct Answer
verified

Ricardian equivalence predicts:

Correct Answer
verified

Exam 29: Fiscal Policy

If the government were to increase its spending,it would expect:

Correct AnswerverifiedShow Answer

Economist John Maynard Keynes once said,"In the long run,we are all dead." Keynes was likely:

Correct AnswerverifiedShow Answer

Economists usually suggest that the best way to examine the deficit is by expressing it:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Fiscal policy that the government actively chooses to adopt is called:

Correct AnswerverifiedShow Answer

If the government increased taxes by $400,and the GDP decreased $600 as a result,the MPC must be:

Correct AnswerverifiedShow Answer

The government-spending multiplier tells us:

Correct AnswerverifiedShow Answer

The total amount of money that a government owes is called:

Correct AnswerverifiedShow Answer

Rising unemployment and decreased business confidence could be signs that the economy is at the start of a(n) :

Correct AnswerverifiedShow Answer

Consumption depends on:

Correct AnswerverifiedShow Answer

Keynesian policy:

Correct AnswerverifiedShow Answer

If the government wishes to increase GDP by $1,200b,and the MPC is 0.8,it should:

Correct AnswerverifiedShow Answer

If the government undertakes expansionary fiscal policy,it might:

Correct AnswerverifiedShow Answer

If interest rates increase,the government debt becomes:

Correct AnswerverifiedShow Answer

Automatic stabilizers are the:

Correct AnswerverifiedShow Answer

Fiscal policy is:

Correct AnswerverifiedShow Answer

A budget deficit is:

Correct AnswerverifiedShow Answer

The direct cost of debt depends on:

Correct AnswerverifiedShow Answer

If the MPC were to increase from 0.75 to 0.8,then the government spending multiplier would:

Correct AnswerverifiedShow Answer

Ricardian equivalence predicts:

Correct AnswerverifiedShow Answer

Correct Answer
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