Question 1

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Accepted Answer

A)  no 
B)  partial 
C)  complete 
D)  more than complete 
A)  no 
B)  partial 
C)  complete 
D)  more than complete C

Question 2

From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely

Accepted Answer

A)  decrease the required reserve ratio. 
B)  decrease government spending. 
C)  decrease oil prices. 
D)  decrease tax rates. 
A)  decrease the required reserve ratio. 
B)  decrease government spending. 
C)  decrease oil prices. 
D)  decrease tax rates. B

Question 3

Refer to Figure 27-1.Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.If contractionary policy is used to move the economy back to long run equilibrium,this would be depicted as a movement from ________ using the static AD-AS model in the figure above.

Accepted Answer

A)  D to C 
B)  C to B 
C)  A to E 
D)  B to A 
E)  E to A 
A)  D to C 
B)  C to B 
C)  A to E 
D)  B to A 
E)  E to A B

Question 4

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 5

A decrease in which of the following would decrease the tax wedge?

Accepted Answer

A)  marginal tax rate 
B)  money supply 
C)  national debt 
D)  federal budget deficit 
A)  marginal tax rate 
B)  money supply 
C)  national debt 
D)  federal budget deficit

Question 6

Crowding out refers to a decline in ________ as a result of an increase in ________.

Accepted Answer

A)  tax revenues; unemployment 
B)  government purchases; tax rates 
C)  government purchases; private expenditures 
D)  private expenditures; government purchases 
A)  tax revenues; unemployment 
B)  government purchases; tax rates 
C)  government purchases; private expenditures 
D)  private expenditures; government purchases

Question 7

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Accepted Answer

A)  an induced; an autonomous 
B)  an expansionary; a contractionary 
C)  an autonomous; an induced 
D)  a contractionary; an expansionary 
A)  an induced; an autonomous 
B)  an expansionary; a contractionary 
C)  an autonomous; an induced 
D)  a contractionary; an expansionary

Question 8

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 9

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and the Congress to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what the president and the Congress are attempting to do.

Accepted Answer

The president and the Congress conduct e

Question 10

The federal government debt as a percentage of GDP fell during the period

Accepted Answer

A)  2002 - 2007. 
B)  1980-1992. 
C)  during World War I and World War II. 
D)  1997-2001. 
E)  the Great Depression. 
A)  2002 - 2007. 
B)  1980-1992. 
C)  during World War I and World War II. 
D)  1997-2001. 
E)  the Great Depression.

Question 11

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

Accepted Answer

Crowding out occurs when the increase in

Question 12

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Accepted Answer

A)  expansionary; actual 
B)  expansionary; cyclically adjusted 
C)  contractionary; actual 
D)  contractionary; cyclically adjusted 
A)  expansionary; actual 
B)  expansionary; cyclically adjusted 
C)  contractionary; actual 
D)  contractionary; cyclically adjusted

Question 13

Proponents of spending on infrastructure as a means to stimulate the economy note that the multiplier effect for ________ is estimated to be larger than the multiplier effect for ________,and would therefore have a greater impact on expanding GDP.

Accepted Answer

A)  increases in government spending; tax cuts 
B)  tax increases; increases in government spending 
C)  decreases in government spending; a balanced budget 
D)  a balanced budget; tax increases 
A)  increases in government spending; tax cuts 
B)  tax increases; increases in government spending 
C)  decreases in government spending; a balanced budget 
D)  a balanced budget; tax increases

Question 14

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Accepted Answer

A) True 
 B)False

Question 15

The largest source of federal government revenue in 2010 was

Accepted Answer

A)  sales taxes. 
B)  corporate income taxes. 
C)  individual income taxes. 
D)  payroll taxes to fund Social Security and Medicare programs. 
A)  sales taxes. 
B)  corporate income taxes. 
C)  individual income taxes. 
D)  payroll taxes to fund Social Security and Medicare programs.

Question 16

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

Accepted Answer

Too little money would be caused by too

Question 17

In an open economy,the government purchases multiplier will be smaller the

Accepted Answer

A)  smaller the marginal propensity to import. 
B)  larger the tax rate. 
C)  larger the marginal propensity to consume. 
D)  All of the above are correct. 
A)  smaller the marginal propensity to import. 
B)  larger the tax rate. 
C)  larger the marginal propensity to consume. 
D)  All of the above are correct.

Question 18

During 1970-1997,the U.S.federal government was

Accepted Answer

A)  in surplus every year. 
B)  balanced every year. 
C)  in deficit every year. 
D)  in deficit most of those years. 
A)  in surplus every year. 
B)  balanced every year. 
C)  in deficit every year. 
D)  in deficit most of those years.

Question 19

Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion.If the president and the Congress increased government purchases by $500 billion,what would be the result on the economy?

Accepted Answer

The economy would go from a short-run eq

Question 20

Congress and the president carry out fiscal policy through changes in

Accepted Answer

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

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

A decrease in which of the following would decrease the tax wedge?

Crowding out refers to a decline in as a result of an increase in .

A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .

The federal government debt as a percentage of GDP fell during the period

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

During the Great Depression,what appeared to be fiscal policy was actually not when the budget deficit or surplus is examined.

Proponents of spending on infrastructure as a means to stimulate the economy note that the multiplier effect for is estimated to be larger than the multiplier effect for ,and would therefore have a greater impact on expanding GDP.

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

The largest source of federal government revenue in 2010 was

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

In an open economy,the government purchases multiplier will be smaller the

During 1970-1997,the U.S.federal government was

Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion.If the president and the Congress increased government purchases by $500 billion,what would be the result on the economy?

Congress and the president carry out fiscal policy through changes in

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 16: Fiscal Policy

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

A decrease in which of the following would decrease the tax wedge?

Crowding out refers to a decline in ________ as a result of an increase in ________.

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

The federal government debt as a percentage of GDP fell during the period

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Proponents of spending on infrastructure as a means to stimulate the economy note that the multiplier effect for ________ is estimated to be larger than the multiplier effect for ________,and would therefore have a greater impact on expanding GDP.

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

The largest source of federal government revenue in 2010 was

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

In an open economy,the government purchases multiplier will be smaller the

During 1970-1997,the U.S.federal government was

Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion.If the president and the Congress increased government purchases by $500 billion,what would be the result on the economy?

Congress and the president carry out fiscal policy through changes in

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Crowding out refers to a decline in as a result of an increase in .

A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .

During the Great Depression,what appeared to be fiscal policy was actually not when the budget deficit or surplus is examined.

Proponents of spending on infrastructure as a means to stimulate the economy note that the multiplier effect for is estimated to be larger than the multiplier effect for ,and would therefore have a greater impact on expanding GDP.