Question 1

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 2

When we add a personal income tax to the macroeconomic model,the

Accepted Answer

A)  multiplier becomes larger. 
B)  multiplier becomes smaller. 
C)  expenditures schedule shifts upward. 
D)  expenditures schedule becomes steeper. 
A)  multiplier becomes larger. 
B)  multiplier becomes smaller. 
C)  expenditures schedule shifts upward. 
D)  expenditures schedule becomes steeper.

Question 3

Critics of supply-side economics argue that

Accepted Answer

A)  tax cuts do not affect supply, only demand. 
B)  supply-siders exaggerate the effects of tax cuts. 
C)  incentives have no effect on behavior. 
D)  the goals of supply-siders are not supported by most economists. 
A)  tax cuts do not affect supply, only demand. 
B)  supply-siders exaggerate the effects of tax cuts. 
C)  incentives have no effect on behavior. 
D)  the goals of supply-siders are not supported by most economists.

Question 4

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 5

Transfer payments represent income that is not earned but received by individuals.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Figure 11-1
  
-In Figure 11-1,the economy is experiencing a(n)

Accepted Answer

A)  inflationary gap equal to EF. 
B)  inflationary gap equal to ET. 
C)  recessionary gap equal to ET. 
D)  recessionary gap equal to FT. 
A)  inflationary gap equal to EF. 
B)  inflationary gap equal to ET. 
C)  recessionary gap equal to ET. 
D)  recessionary gap equal to FT.

Question 8

A fiscal policy that reduces taxes or increases government spending will cause a(n)

Accepted Answer

A)  increase in real GDP and a decrease in the price level. 
B)  increase in real GDP and an increase in the price level. 
C)  decrease in real GDP and a decrease in the price level. 
D)  decrease in real GDP and an increase in the price level. 
A)  increase in real GDP and a decrease in the price level. 
B)  increase in real GDP and an increase in the price level. 
C)  decrease in real GDP and a decrease in the price level. 
D)  decrease in real GDP and an increase in the price level.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Accepted Answer

A)  "There must be a constant philosophical prejudice against any intervention by the state into our lives, for by definition such intervention abridges liberty."-William Simon 
B)  "The bastards [read politicians] can't spend what they don't have."-Howard Jarvis 
C)  "The family that takes its mauve and cerise, air-conditioned, power-steered, power-braked automobile through cities that are badly paved, made hideous by litter, [and] blighted buildings...to picnic beside a polluted stream amid the stench of refuse may properly reflect on the curious unevenness of their blessings."-J.K. Galbraith 
D)  "Public expenditures are made for the primary benefit of the middle class and financed with taxes on the poor and rich."-Director's Law 
A)  "There must be a constant philosophical prejudice against any intervention by the state into our lives, for by definition such intervention abridges liberty."-William Simon 
B)  "The bastards [read politicians] can't spend what they don't have."-Howard Jarvis 
C)  "The family that takes its mauve and cerise, air-conditioned, power-steered, power-braked automobile through cities that are badly paved, made hideous by litter, [and] blighted buildings...to picnic beside a polluted stream amid the stench of refuse may properly reflect on the curious unevenness of their blessings."-J.K. Galbraith 
D)  "Public expenditures are made for the primary benefit of the middle class and financed with taxes on the poor and rich."-Director's Law

Question 11

Government transfer payments act as automatic stabilizers because as labor income decreases,transfer payments

Accepted Answer

A)  decrease as well. 
B)  remain constant. 
C)  increase. 
D)  to the government increase. 
A)  decrease as well. 
B)  remain constant. 
C)  increase. 
D)  to the government increase.

Question 12

A Keynesian economist would expect a supply-side tax cut to shift

Accepted Answer

A)  only the aggregate supply curve outward. 
B)  only the aggregate demand curve outward. 
C)  both the aggregate demand and aggregate supply curves outward. 
D)  the aggregate supply curve outward and the aggregate demand curve inward. 
A)  only the aggregate supply curve outward. 
B)  only the aggregate demand curve outward. 
C)  both the aggregate demand and aggregate supply curves outward. 
D)  the aggregate supply curve outward and the aggregate demand curve inward.

Question 13

The reason that the multiplier is smaller if there are variable taxes is that

Accepted Answer

A)  taxes add to government spending, which increases income. 
B)  people get angry about taxes and decide to work less. 
C)  tax increases shift the expenditure line upward. 
D)  part of an increase in income is taken away in taxes. 
A)  taxes add to government spending, which increases income. 
B)  people get angry about taxes and decide to work less. 
C)  tax increases shift the expenditure line upward. 
D)  part of an increase in income is taken away in taxes.

Question 14

Taxes,transfer payments,and government purchases are the components of automatic stabilizers.

Accepted Answer

A) True 
 B)False

Question 15

In 2000,many economists believed that the most serious macroeconomic problem confronting the U.S.economy was an inflationary gap.Which policies would be effective in dealing with this problem?

Accepted Answer

A)  Increase transfer payments. 
B)  Increase government purchases. 
C)  Decrease personal income taxes. 
D)  Increase personal income taxes. 
A)  Increase transfer payments. 
B)  Increase government purchases. 
C)  Decrease personal income taxes. 
D)  Increase personal income taxes.

Question 16

How does an increase in government transfer payments affect aggregate demand?

Accepted Answer

A)  It has the same effect as a tax increase, which lowers AD with a larger multiplier than a spending decrease. 
B)  It has the same effect as a tax cut, which increases AD but with a smaller multiplier than a change in spending. 
C)  It has the same effect as a spending increase, which increases AD with a larger multiplier than a tax cut. 
D)  It has the same effect as a spending decrease, which increases AD with a larger multiplier than a spending decrease. 
A)  It has the same effect as a tax increase, which lowers AD with a larger multiplier than a spending decrease. 
B)  It has the same effect as a tax cut, which increases AD but with a smaller multiplier than a change in spending. 
C)  It has the same effect as a spending increase, which increases AD with a larger multiplier than a tax cut. 
D)  It has the same effect as a spending decrease, which increases AD with a larger multiplier than a spending decrease.

Question 17

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 18

The oversimplified formula for the multiplier yields a number that is too large due to the exclusion of

Accepted Answer

A)  variable imports. 
B)  changes in the price-level. 
C)  income taxes. 
D)  All of the above. 
A)  variable imports. 
B)  changes in the price-level. 
C)  income taxes. 
D)  All of the above.

Question 19

If increases in government spending lead to inflation,the value of the multiplier is reduced.

Accepted Answer

A) True 
 B)False

Question 20

The difference between a fixed tax and a variable tax is that

Accepted Answer

A)  fixed taxes can never be changed, but variable taxes can be changed. 
B)  a change in fixed taxes has no effect on aggregate demand, but a change in variable taxes has an impact. 
C)  a variable tax changes when GDP changes, but a fixed tax does not change with GDP. 
D)  a variable tax can be changed easily, whereas changing fixed taxes requires a constitutional amendment. 
A)  fixed taxes can never be changed, but variable taxes can be changed. 
B)  a change in fixed taxes has no effect on aggregate demand, but a change in variable taxes has an impact. 
C)  a variable tax changes when GDP changes, but a fixed tax does not change with GDP. 
D)  a variable tax can be changed easily, whereas changing fixed taxes requires a constitutional amendment.

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?

When we add a personal income tax to the macroeconomic model,the

Critics of supply-side economics argue that

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

Transfer payments represent income that is not earned but received by individuals.

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

Figure 11-1 -In Figure 11-1,the economy is experiencing a(n)

A fiscal policy that reduces taxes or increases government spending will cause a(n)

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

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Government transfer payments act as automatic stabilizers because as labor income decreases,transfer payments

A Keynesian economist would expect a supply-side tax cut to shift

The reason that the multiplier is smaller if there are variable taxes is that

Taxes,transfer payments,and government purchases are the components of automatic stabilizers.

In 2000,many economists believed that the most serious macroeconomic problem confronting the U.S.economy was an inflationary gap.Which policies would be effective in dealing with this problem?

How does an increase in government transfer payments affect aggregate demand?

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?

The oversimplified formula for the multiplier yields a number that is too large due to the exclusion of

If increases in government spending lead to inflation,the value of the multiplier is reduced.

The difference between a fixed tax and a variable tax is that

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

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?

When we add a personal income tax to the macroeconomic model,the

Critics of supply-side economics argue that

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

Transfer payments represent income that is not earned but received by individuals.

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

Figure 11-1 -In Figure 11-1,the economy is experiencing a(n)

A fiscal policy that reduces taxes or increases government spending will cause a(n)

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

Which of the following individuals would most likely favor an increase in government spending,as opposed to a tax cut,as the basis for expansionary fiscal policy?

Government transfer payments act as automatic stabilizers because as labor income decreases,transfer payments

A Keynesian economist would expect a supply-side tax cut to shift

The reason that the multiplier is smaller if there are variable taxes is that

Taxes,transfer payments,and government purchases are the components of automatic stabilizers.

In 2000,many economists believed that the most serious macroeconomic problem confronting the U.S.economy was an inflationary gap.Which policies would be effective in dealing with this problem?

How does an increase in government transfer payments affect aggregate demand?

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?

The oversimplified formula for the multiplier yields a number that is too large due to the exclusion of

If increases in government spending lead to inflation,the value of the multiplier is reduced.

The difference between a fixed tax and a variable tax is that

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