Question 1

There is some agreement between the beliefs of President George W.Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President

Accepted Answer

A)  Keynes. 
B)  Clinton. 
C)  Reagan. 
D)  Carter. 
A)  Keynes. 
B)  Clinton. 
C)  Reagan. 
D)  Carter.

Question 2

Figure 11-3
  
-In Figure 11-3, which line represents the change in the consumption schedule caused by an increase in the residential property 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 3

When the economy has an income tax that is variable, the multiplier is

Accepted Answer

A)  unchanged. 
B)  larger. 
C)  smaller. 
D)  unpredictable. 
A)  unchanged. 
B)  larger. 
C)  smaller. 
D)  unpredictable.

Question 4

Supply-side tax cuts are more likely to have the intended beneficial effect on

Accepted Answer

A)  budget deficits. 
B)  consumer spending. 
C)  investment spending. 
D)  net exports. 
A)  budget deficits. 
B)  consumer spending. 
C)  investment spending. 
D)  net exports.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

When income taxes are included in the basic macroeconomic model, the value of the

Accepted Answer

A)  inflationary effect is increased. 
B)  multiplier is increased. 
C)  multiplier is decreased. 
D)  expenditure function is increased. 
A)  inflationary effect is increased. 
B)  multiplier is increased. 
C)  multiplier is decreased. 
D)  expenditure function is increased.

Question 7

Contractionary fiscal policy may have some undesirable consequences.Among these is

Accepted Answer

A)  higher unemployment. 
B)  higher inflation. 
C)  higher net exports. 
D)  larger federal deficits. 
A)  higher unemployment. 
B)  higher inflation. 
C)  higher net exports. 
D)  larger federal deficits.

Question 8

Raising taxes or increasing transfer payments would reduce total spending.

Accepted Answer

A) True 
 B)False

Question 9

For any given change in taxes, the multiplier

Accepted Answer

A)  will work indirectly through consumption. 
B)  effect will occur in two steps. 
C)  effect will be smaller than for an equivalent dollar change in government spending. 
D)  All of the above are correct. 
A)  will work indirectly through consumption. 
B)  effect will occur in two steps. 
C)  effect will be smaller than for an equivalent dollar change in government spending. 
D)  All of the above are correct.

Question 10

A reduction in the capital gains tax, often advocated by proponents of supply-side economics, is supposed to stimulate increased

Accepted Answer

A)  consumer spending. 
B)  net exports. 
C)  investment spending. 
D)  government spending. 
A)  consumer spending. 
B)  net exports. 
C)  investment spending. 
D)  government spending.

Question 11

Suppose the federal government is considering alternatives to increase the level of real GDP in order to reduce unemployment.It can only do one of the following.Which will have the smallest impact on the federal budget?

Accepted Answer

A)  decreasing transfer payments 
B)  increasing government spending 
C)  increasing transfer payments 
D)  decreasing government spending 
A)  decreasing transfer payments 
B)  increasing government spending 
C)  increasing transfer payments 
D)  decreasing government spending

Question 12

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 13

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

Accepted Answer

Conservatives tend to want a smaller gov

Question 14

Which of the following conclusions about supply-side tax initiatives is accepted by most economists?

Accepted Answer

A)  Supply-side tax cuts are likely to benefit the poor as much as the rich. 
B)  Supply-side tax cuts will almost certainly lead to smaller budget deficits. 
C)  Such tax cuts probably will increase aggregate supply quickly, but an increase in aggregate demand will come later. 
D)  Tax reductions aimed at stimulating business investment are likely to have a greater impact than tax reductions aimed at getting people to work longer hours or save more. 
A)  Supply-side tax cuts are likely to benefit the poor as much as the rich. 
B)  Supply-side tax cuts will almost certainly lead to smaller budget deficits. 
C)  Such tax cuts probably will increase aggregate supply quickly, but an increase in aggregate demand will come later. 
D)  Tax reductions aimed at stimulating business investment are likely to have a greater impact than tax reductions aimed at getting people to work longer hours or save more.

Question 15

The addition of imports reduces the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 16

In 2009, the U.S.economy was experiencing an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 17

Why does a tax change affect aggregate demand?

Accepted Answer

A)  A tax change alters saving by an equal amount. 
B)  A tax change alters imports and net exports. 
C)  A tax change alters government spending by an equal amount. 
D)  A tax change alters disposable income and consumption spending. 
A)  A tax change alters saving by an equal amount. 
B)  A tax change alters imports and net exports. 
C)  A tax change alters government spending by an equal amount. 
D)  A tax change alters disposable income and consumption spending.

Question 18

Reductions in the personal income tax, often advocated by supply-siders to increase labor supply and effort, can be expected to also

Accepted Answer

A)  decrease consumption spending. 
B)  increase consumption spending. 
C)  decrease investment spending. 
D)  increase export sales. 
A)  decrease consumption spending. 
B)  increase consumption spending. 
C)  decrease investment spending. 
D)  increase export sales.

Question 19

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 20

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

Exam 28: Managing Aggregate Demand: Fiscal Policy

There is some agreement between the beliefs of President George W.Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President

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

When the economy has an income tax that is variable, the multiplier is

Supply-side tax cuts are more likely to have the intended beneficial effect on

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

When income taxes are included in the basic macroeconomic model, the value of the

Contractionary fiscal policy may have some undesirable consequences.Among these is

Raising taxes or increasing transfer payments would reduce total spending.

For any given change in taxes, the multiplier

A reduction in the capital gains tax, often advocated by proponents of supply-side economics, is supposed to stimulate increased

Suppose the federal government is considering alternatives to increase the level of real GDP in order to reduce unemployment.It can only do one of the following.Which will have the smallest impact on the federal budget?

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

Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.

Which of the following conclusions about supply-side tax initiatives is accepted by most economists?

The addition of imports reduces the value of the multiplier.

In 2009, the U.S.economy was experiencing an inflationary gap.

Why does a tax change affect aggregate demand?

Reductions in the personal income tax, often advocated by supply-siders to increase labor supply and effort, can be expected to also

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 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.

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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