Question 1

How will a cut in a fixed tax affect the consumption schedule?

Accepted Answer

A)  It will shift downward. 
B)  It will shift upward. 
C)  It will become flatter. 
D)  It will become steeper. 
A)  It will shift downward. 
B)  It will shift upward. 
C)  It will become flatter. 
D)  It will become steeper.

Question 2

A proponent of supply-side economics would advocate

Accepted Answer

A)  reducing income taxes on saving. 
B)  reducing tax credits for research and development. 
C)  eliminating the depreciation allowance. 
D)  increasing the corporate income tax. 
A)  reducing income taxes on saving. 
B)  reducing tax credits for research and development. 
C)  eliminating the depreciation allowance. 
D)  increasing the corporate income tax.

Question 3

Figure 11-3  
-In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in the personal income tax as advocated by President George W.Bush in 2001?

Accepted Answer

A)  C1 in graph (a) 
B)  C2 in graph (a) 
C)  C1 in graph (b) 
D)  C2 in graph (b) 
A)  C1 in graph (a) 
B)  C2 in graph (a) 
C)  C1 in graph (b) 
D)  C2 in graph (b)

Question 4

One of the practical issues in the choice of government spending or taxes to change aggregate demand is how large a

Accepted Answer

A)  change in demand we want. 
B)  trade deficit we want. 
C)  budget deficit we want. 
D)  government sector we want. 
A)  change in demand we want. 
B)  trade deficit we want. 
C)  budget deficit we want. 
D)  government sector we want.

Question 5

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

Accepted Answer

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

Question 6

When policy makers choose between tax policy and spending policy to affect the level of aggregate demand,they tend to choose on the basis of

Accepted Answer

A)  how large a public sector they want. 
B)  how much they want to change aggregate demand. 
C)  how much they want to change aggregate supply. 
D)  which has the larger multiplier. 
A)  how large a public sector they want. 
B)  how much they want to change aggregate demand. 
C)  how much they want to change aggregate supply. 
D)  which has the larger multiplier.

Question 7

Capital gains tax cuts inevitably benefit

Accepted Answer

A)  low-income workers. 
B)  retired persons. 
C)  workers in large cities. 
D)  high-income stock owners. 
A)  low-income workers. 
B)  retired persons. 
C)  workers in large cities. 
D)  high-income stock owners.

Question 8

When the government taxes and spends,each activity affects GDP in the same proportion.

Accepted Answer

A) True 
 B)False

Question 9

In contrast to changes in government spending,tax changes affect spending

Accepted Answer

A)  directly. 
B)  in the same proportion. 
C)  by a greater amount. 
D)  indirectly. 
A)  directly. 
B)  in the same proportion. 
C)  by a greater amount. 
D)  indirectly.

Question 10

Figure 11-2  
-Which graph in Figure 11-2 best reflects a supply-sider's view of the impact of an increase in the personal income tax rate?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

Figure 11-1  
-In Figure 11-1,the slope of the expenditures schedule is .75 and the government wishes to achieve full employment.It should

Accepted Answer

A)  cut spending by 1,000. 
B)  increase spending by 1,000. 
C)  cut taxes by 1,000. 
D)  increase spending by 250. 
E)  cut taxes by 250. 
A)  cut spending by 1,000. 
B)  increase spending by 1,000. 
C)  cut taxes by 1,000. 
D)  increase spending by 250. 
E)  cut taxes by 250.

Question 12

During the deliberations on fiscal stimulus in 2009,the debate over fiscal policy focused on

Accepted Answer

A)  the multiplier effect of tax cuts versus higher government spending. 
B)  the multiplier effect of different types of tax cuts. 
C)  the incentive effects of tax cuts. 
D)  all of the above 
A)  the multiplier effect of tax cuts versus higher government spending. 
B)  the multiplier effect of different types of tax cuts. 
C)  the incentive effects of tax cuts. 
D)  all of the above

Question 13

During the debate on the stimulus package in 2009 and 2010,Republicans argued in favor of increased government spending as opposed to tax cuts based in part on the impact government spending would have on aggregate supply.

Accepted Answer

A) True 
 B)False

Question 14

Figure 11-1  
-In Figure 11-1,to achieve equilibrium at potential GDP the government could

Accepted Answer

A)  increase taxes. 
B)  decrease transfer payments. 
C)  increase government purchases. 
D)  None of the above is correct. 
A)  increase taxes. 
B)  decrease transfer payments. 
C)  increase government purchases. 
D)  None of the above is correct.

Question 15

Figure 11-3  
-In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in fixed taxes?

Accepted Answer

A)  C1 in graph (a) 
B)  C2 in graph (a) 
C)  C1 in graph (b) 
D)  C2 in graph (b) 
A)  C1 in graph (a) 
B)  C2 in graph (a) 
C)  C1 in graph (b) 
D)  C2 in graph (b)

Question 16

If Congress votes to increase government purchases and at the same time decrease personal income taxes,they

Accepted Answer

A)  have decided to balance the federal budget. 
B)  have voted for the proper policy to counteract a recessionary gap. 
C)  have voted for the proper policy to counteract an inflationary gap. 
D)  are trying to achieve a federal budget surplus. 
A)  have decided to balance the federal budget. 
B)  have voted for the proper policy to counteract a recessionary gap. 
C)  have voted for the proper policy to counteract an inflationary gap. 
D)  are trying to achieve a federal budget surplus.

Question 17

In 2009,President Obama and Congress stimulated aggregate demand by

Accepted Answer

A)  increasing taxes and government spending. 
B)  decreasing taxes and government spending. 
C)  increasing taxes and decreasing government spending. 
D)  decreasing taxes and increasing government spending. 
A)  increasing taxes and government spending. 
B)  decreasing taxes and government spending. 
C)  increasing taxes and decreasing government spending. 
D)  decreasing taxes and increasing government spending.

Question 18

Taxes constitute the difference between GDP and disposable income.

Accepted Answer

A) True 
 B)False

Question 19

Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit.Which action will have the larger effect on equilibrium GDP?

Accepted Answer

A)  the increase in taxes 
B)  the decrease in spending 
C)  the effects will be equal 
D)  not possible to determine without knowing the multiplier 
A)  the increase in taxes 
B)  the decrease in spending 
C)  the effects will be equal 
D)  not possible to determine without knowing the multiplier

Question 20

If the MPC in the U.S.was low,it would increase the value of the multiplier.

Accepted Answer

A) True 
 B)False

How will a cut in a fixed tax affect the consumption schedule?

A proponent of supply-side economics would advocate

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in the personal income tax as advocated by President George W.Bush in 2001?

One of the practical issues in the choice of government spending or taxes to change aggregate demand is how large a

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

When policy makers choose between tax policy and spending policy to affect the level of aggregate demand,they tend to choose on the basis of

Capital gains tax cuts inevitably benefit

When the government taxes and spends,each activity affects GDP in the same proportion.

In contrast to changes in government spending,tax changes affect spending

Figure 11-2 -Which graph in Figure 11-2 best reflects a supply-sider's view of the impact of an increase in the personal income tax rate?

Figure 11-1 -In Figure 11-1,the slope of the expenditures schedule is .75 and the government wishes to achieve full employment.It should

During the deliberations on fiscal stimulus in 2009,the debate over fiscal policy focused on

During the debate on the stimulus package in 2009 and 2010,Republicans argued in favor of increased government spending as opposed to tax cuts based in part on the impact government spending would have on aggregate supply.

Figure 11-1 -In Figure 11-1,to achieve equilibrium at potential GDP the government could

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in fixed taxes?

If Congress votes to increase government purchases and at the same time decrease personal income taxes,they

In 2009,President Obama and Congress stimulated aggregate demand by

Taxes constitute the difference between GDP and disposable income.

Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit.Which action will have the larger effect on equilibrium GDP?

If the MPC in the U.S.was low,it would increase the value of the multiplier.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 11: Managing Aggregate Demand Fiscal Policy

How will a cut in a fixed tax affect the consumption schedule?

A proponent of supply-side economics would advocate

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in the personal income tax as advocated by President George W.Bush in 2001?

One of the practical issues in the choice of government spending or taxes to change aggregate demand is how large a

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

When policy makers choose between tax policy and spending policy to affect the level of aggregate demand,they tend to choose on the basis of

Capital gains tax cuts inevitably benefit

When the government taxes and spends,each activity affects GDP in the same proportion.

In contrast to changes in government spending,tax changes affect spending

Figure 11-2 -Which graph in Figure 11-2 best reflects a supply-sider's view of the impact of an increase in the personal income tax rate?

Figure 11-1 -In Figure 11-1,the slope of the expenditures schedule is .75 and the government wishes to achieve full employment.It should

During the deliberations on fiscal stimulus in 2009,the debate over fiscal policy focused on

During the debate on the stimulus package in 2009 and 2010,Republicans argued in favor of increased government spending as opposed to tax cuts based in part on the impact government spending would have on aggregate supply.

Figure 11-1 -In Figure 11-1,to achieve equilibrium at potential GDP the government could

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by a cut in fixed taxes?

If Congress votes to increase government purchases and at the same time decrease personal income taxes,they

In 2009,President Obama and Congress stimulated aggregate demand by

Taxes constitute the difference between GDP and disposable income.

Congress is debating whether to raise taxes by $100 billion or decrease spending by $100 billion in order to eliminate a budget deficit.Which action will have the larger effect on equilibrium GDP?

If the MPC in the U.S.was low,it would increase the value of the multiplier.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters