Question 1

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. 
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 2

The Bush tax cuts

Accepted Answer

A)  reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B)  reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C)  reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D)  held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E)  Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
A)  reduced tax rates for the upper brackets and increased tax rates for lower income taxpayers. 
B)  reduced tax rates for the upper brackets and held constant tax rates for lower income taxpayers. 
C)  reduced tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
D)  held constant tax rates for the upper brackets and decreased tax rates for lower income taxpayers. 
E)  Increased tax rates for the upper brackets and decreased tax rates for lower income taxpayers.

Question 3

The Reagan tax cuts of the 1980s

Accepted Answer

A)  had not impact on the budget deficit. 
B)  decreased the budget deficit. 
C)  increased the budget deficit. 
D)  initially decreased the deficit but later increased it. 
A)  had not impact on the budget deficit. 
B)  decreased the budget deficit. 
C)  increased the budget deficit. 
D)  initially decreased the deficit but later increased it.

Question 4

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 5

President George W.Bush, who favored a smaller government sector,

Accepted Answer

A)  believed we should increase G to eliminate a recessionary gap. 
B)  believed we should raise taxes to eliminate an inflationary gap. 
C)  favored an active fiscal policy just as well as those who favor a larger government sector. 
D)  argued against the use of an active fiscal policy. 
A)  believed we should increase G to eliminate a recessionary gap. 
B)  believed we should raise taxes to eliminate an inflationary gap. 
C)  favored an active fiscal policy just as well as those who favor a larger government sector. 
D)  argued against the use of an active fiscal policy.

Exam 28: Managing Aggregate Demand: Fiscal Policy

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

The Bush tax cuts

The Reagan tax cuts of the 1980s

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?

President George W.Bush, who favored a smaller government sector,

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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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