Question 1

Transfer payments exactly replace the income lost because of taxes.

Accepted Answer

A) True 
 B)False

Question 2

How does a tax cut affect the expenditure schedule?

Accepted Answer

A)  It causes movement to the left along the schedule. 
B)  It causes the schedule to shift upward. 
C)  It causes movement to the right along the schedule. 
D)  It causes the schedule to shift downward. 
A)  It causes movement to the left along the schedule. 
B)  It causes the schedule to shift upward. 
C)  It causes movement to the right along the schedule. 
D)  It causes the schedule to shift downward.

Question 3

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 4

Figure 11-3  
-Refer to Table 11-1.What is the level of saving in this model?

Accepted Answer

A)  92.5 
B)  72.5 
C)  62.5 
D)  52.5 
E)  42.5 
A)  92.5 
B)  72.5 
C)  62.5 
D)  52.5 
E)  42.5

Question 5

Figure 11-3  
-In Figure 11-3,which line represents the change in the consumption schedule caused by an increase in the personal income tax?

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 6

Government purchases and income taxes have the same effect on the multiplier.

Accepted Answer

A) True 
 B)False

Question 7

President Obama would generally advocate increased spending when the economy needs stimulus and increased taxation when the economy needs to be restricted.

Accepted Answer

A) True 
 B)False

Question 8

During the period from 2001 to 2006,there were several major cuts in personal income tax rates.What effect did these have on the value of the multiplier?

Accepted Answer

A)  They decreased the value of the multiplier. 
B)  They had no effect on the multiplier. 
C)  They increased the value of the multiplier. 
D)  The effect was uncertain. 
A)  They decreased the value of the multiplier. 
B)  They had no effect on the multiplier. 
C)  They increased the value of the multiplier. 
D)  The effect was uncertain.

Question 9

The main idea behind supply-side tax cuts is that

Accepted Answer

A)  tax cuts increase spending,which increases aggregate supply. 
B)  some tax cuts can increase aggregate supply. 
C)  people like lower taxes and will spend more if they get them. 
D)  it is easier to shift aggregate supply than aggregate demand. 
A)  tax cuts increase spending,which increases aggregate supply. 
B)  some tax cuts can increase aggregate supply. 
C)  people like lower taxes and will spend more if they get them. 
D)  it is easier to shift aggregate supply than aggregate demand.

Question 10

Fiscal policy consists of

Accepted Answer

A)  taxes and interest rates. 
B)  government purchases and defense spending. 
C)  the money supply and taxes. 
D)  taxes and government spending. 
A)  taxes and interest rates. 
B)  government purchases and defense spending. 
C)  the money supply and taxes. 
D)  taxes and government spending.

Question 11

In the short run,tax cuts that are intended to increase aggregate supply have

Accepted Answer

A)  almost no effect on aggregate demand,and a small effect on aggregate supply. 
B)  about an equal effect on both aggregate demand and aggregate supply. 
C)  a much greater effect on aggregate demand than on aggregate supply. 
D)  almost no effect on aggregate supply,and a negative effect on aggregate demand. 
A)  almost no effect on aggregate demand,and a small effect on aggregate supply. 
B)  about an equal effect on both aggregate demand and aggregate supply. 
C)  a much greater effect on aggregate demand than on aggregate supply. 
D)  almost no effect on aggregate supply,and a negative effect on aggregate demand.

Question 12

A one-dollar tax reduction has the same effect as a one-dollar increase in government purchases.

Accepted Answer

A) True 
 B)False

Question 13

Most tax payments increase as GDP increases.

Accepted Answer

A) True 
 B)False

Question 14

If President Obama wanted to decrease aggregate demand,which of the following would he 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 government spending,because it keeps the public sector small. 
C)  An increase in transfer payments,because it has a larger multiplier than tax changes. 
D)  An increase in taxes,because it would not make the public sector smaller. 
A)  An increase in government spending,because it will increase the size of the public sector. 
B)  A decrease in government spending,because it keeps the public sector small. 
C)  An increase in transfer payments,because it has a larger multiplier than tax changes. 
D)  An increase in taxes,because it would not make the public sector smaller.

Question 15

Figure 11-2  
-Which graph in Figure 11-2 best reflects a Keynesian's view of the impact of raising taxes on saving?

Accepted Answer

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

Question 16

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. 
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 17

At any given price level,equilibrium GDP on the expenditure side occurs when ____.

Accepted Answer

A)  Y = C + I + G − (X − IM) 
B)  Y = C + I − G 
C)  Y = C + I + G + (X − IM) 
D)  Y = C + X + G + (X − IM) 
A)  Y = C + I + G − (X − IM) 
B)  Y = C + I − G 
C)  Y = C + I + G + (X − IM) 
D)  Y = C + X + G + (X − IM)

Question 18

What are the policies usually advocated by supply side economists? How do they justify these proposals?

Accepted Answer

Following are the usual suggestions: (a)

Question 19

If income tax rates are increased in an attempt to balance the federal budget,we should expect to see

Accepted Answer

A)  an increase in consumption and a decrease in GDP. 
B)  an increase in consumption and an increase in GDP. 
C)  a decrease in consumption and a decrease in GDP. 
D)  a decrease in consumption and an increase in GDP. 
A)  an increase in consumption and a decrease in GDP. 
B)  an increase in consumption and an increase in GDP. 
C)  a decrease in consumption and a decrease in GDP. 
D)  a decrease in consumption and an increase in GDP.

Question 20

To eliminate an inflationary gap,the expenditure schedule should

Accepted Answer

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

Transfer payments exactly replace the income lost because of taxes.

How does a tax cut affect the expenditure schedule?

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

Figure 11-3 -Refer to Table 11-1.What is the level of saving in this model?

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by an increase in the personal income tax?

Government purchases and income taxes have the same effect on the multiplier.

President Obama would generally advocate increased spending when the economy needs stimulus and increased taxation when the economy needs to be restricted.

During the period from 2001 to 2006,there were several major cuts in personal income tax rates.What effect did these have on the value of the multiplier?

The main idea behind supply-side tax cuts is that

Fiscal policy consists of

In the short run,tax cuts that are intended to increase aggregate supply have

A one-dollar tax reduction has the same effect as a one-dollar increase in government purchases.

Most tax payments increase as GDP increases.

If President Obama wanted to decrease aggregate demand,which of the following would he tend to favor?

Figure 11-2 -Which graph in Figure 11-2 best reflects a Keynesian's view of the impact of raising taxes on saving?

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

At any given price level,equilibrium GDP on the expenditure side occurs when ____.

What are the policies usually advocated by supply side economists? How do they justify these proposals?

If income tax rates are increased in an attempt to balance the federal budget,we should expect to see

To eliminate an inflationary gap,the expenditure schedule should

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

Exam 11: Managing Aggregate Demand Fiscal Policy

Transfer payments exactly replace the income lost because of taxes.

How does a tax cut affect the expenditure schedule?

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

Figure 11-3 -Refer to Table 11-1.What is the level of saving in this model?

Figure 11-3 -In Figure 11-3,which line represents the change in the consumption schedule caused by an increase in the personal income tax?

Government purchases and income taxes have the same effect on the multiplier.

President Obama would generally advocate increased spending when the economy needs stimulus and increased taxation when the economy needs to be restricted.

During the period from 2001 to 2006,there were several major cuts in personal income tax rates.What effect did these have on the value of the multiplier?

The main idea behind supply-side tax cuts is that

Fiscal policy consists of

In the short run,tax cuts that are intended to increase aggregate supply have

A one-dollar tax reduction has the same effect as a one-dollar increase in government purchases.

Most tax payments increase as GDP increases.

If President Obama wanted to decrease aggregate demand,which of the following would he tend to favor?

Figure 11-2 -Which graph in Figure 11-2 best reflects a Keynesian's view of the impact of raising taxes on saving?

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

At any given price level,equilibrium GDP on the expenditure side occurs when ____.

What are the policies usually advocated by supply side economists? How do they justify these proposals?

If income tax rates are increased in an attempt to balance the federal budget,we should expect to see

To eliminate an inflationary gap,the expenditure schedule should

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