Question 1

Fiscal policy is implemented primarily by

Accepted Answer

A)  local governments alone. 
B)  the defense department. 
C)  state governments alone. 
D)  the federal government. 
E)  state and local governments. 
A)  local governments alone. 
B)  the defense department. 
C)  state governments alone. 
D)  the federal government. 
E)  state and local governments.

Question 2

Keynesians

Accepted Answer

A)  advocate for a laissez-faire approach. 
B)  believe that equilibrium may exist at less than full employment. 
C)  believe in the use of fiscal policy to stabilize the economy. 
D)  b and c 
E)  all of the above 
A)  advocate for a laissez-faire approach. 
B)  believe that equilibrium may exist at less than full employment. 
C)  believe in the use of fiscal policy to stabilize the economy. 
D)  b and c 
E)  all of the above

Question 3

The Laffer curve illustrates that

Accepted Answer

A)  there are two tax rates at which zero tax revenues are raised. 
B)  a decrease in tax rates can cause an increase in tax revenues. 
C)  an increase in tax rates can cause an increase in tax revenues. 
D)  an increase in tax rates can cause a decrease in tax revenues. 
E)  all of the above 
A)  there are two tax rates at which zero tax revenues are raised. 
B)  a decrease in tax rates can cause an increase in tax revenues. 
C)  an increase in tax rates can cause an increase in tax revenues. 
D)  an increase in tax rates can cause a decrease in tax revenues. 
E)  all of the above

Question 4

Over the past 50 years in the United States,tax revenues as a percentage of GDP have tended to be in the __________________ percent range.

Accepted Answer

A)  1 to 9 
B)  10 to 14 
C)  15 to 19 
D)  20 to 24 
E)  25 to 30 
A)  1 to 9 
B)  10 to 14 
C)  15 to 19 
D)  20 to 24 
E)  25 to 30

Question 5

Which of the following is an example of crowding out?

Accepted Answer

A)  A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. 
B)  A budget deficit causes an increase in interest rates,which causes a decrease in investment spending. 
C)  An increase in tariffs which causes a decrease in imports. 
D)  A decrease in government housing subsidies which causes an increase in private spending on housing. 
A)  A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. 
B)  A budget deficit causes an increase in interest rates,which causes a decrease in investment spending. 
C)  An increase in tariffs which causes a decrease in imports. 
D)  A decrease in government housing subsidies which causes an increase in private spending on housing.

Question 6

Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $500 million.This is an example of

Accepted Answer

A)  incomplete crowding out. 
B)  complete crowding out. 
C)  zero crowding out. 
D)  a and c 
E)  none of the above 
A)  incomplete crowding out. 
B)  complete crowding out. 
C)  zero crowding out. 
D)  a and c 
E)  none of the above

Question 7

As a result of crowding out,demand-side fiscal policy may be ineffective at achieving certain macroeconomic goals.

Accepted Answer

A) True 
 B)False

Question 8

A subsidy is the same thing as a tax deduction

Accepted Answer

A) True 
 B)False

Question 9

Some economists believe that permanently lower marginal income tax rates __________ the incentive to work and thus shift the __________.

Accepted Answer

A)  increase; LRAS curve to the right 
B)  increase; AD curve to the right 
C)  increase; SRAS curve to the left 
D)  decrease; LRAS curve to the right 
E)  decrease; AD curve to the left 
A)  increase; LRAS curve to the right 
B)  increase; AD curve to the right 
C)  increase; SRAS curve to the left 
D)  decrease; LRAS curve to the right 
E)  decrease; AD curve to the left

Question 10

Increased government spending and tax cuts characterize

Accepted Answer

A)  contractionary fiscal policy. 
B)  expansionary fiscal policy. 
C)  expansionary monetary policy. 
D)  deflationary policy. 
E)  none of the above 
A)  contractionary fiscal policy. 
B)  expansionary fiscal policy. 
C)  expansionary monetary policy. 
D)  deflationary policy. 
E)  none of the above

Question 11

-Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is no crowding out.As a result,the aggregate demand (AD)curve in the exhibit

Accepted Answer

A)  maintains its present position at AD1. 
B)  shifts rightward,ideally so that it goes through point 2. 
C)  shifts rightward,ideally so that it goes beyond point 2. 
D)  shifts leftward. 
E)  ​does not shift,but the SRAS curve will shift rightward so that it goes through point 3. 
A)  maintains its present position at AD1. 
B)  shifts rightward,ideally so that it goes through point 2. 
C)  shifts rightward,ideally so that it goes beyond point 2. 
D)  shifts leftward. 
E)  ​does not shift,but the SRAS curve will shift rightward so that it goes through point 3.

Question 12

Which of the following is an example of automatic fiscal policy?

Accepted Answer

A)  The government deliberately raises taxes. 
B)  The government deliberately lowers taxes. 
C)  The government deliberately increases spending. 
D)  The government deliberately decreases spending. 
E)  none of the above 
A)  The government deliberately raises taxes. 
B)  The government deliberately lowers taxes. 
C)  The government deliberately increases spending. 
D)  The government deliberately decreases spending. 
E)  none of the above

Question 13

Complete crowding out occurs when an increase in government spending is completely offset by an equal increase in tax revenues.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true?

Accepted Answer

A)  A budget deficit occurs when government expenditures exceed tax receipts during any single year. 
B)  The public debt is the total amount the federal government owes its creditors. 
C)  The public debt is greater than the net public debt. 
D)  b and c 
E)  a,b,and c 
A)  A budget deficit occurs when government expenditures exceed tax receipts during any single year. 
B)  The public debt is the total amount the federal government owes its creditors. 
C)  The public debt is greater than the net public debt. 
D)  b and c 
E)  a,b,and c

Question 15

If Smith believes the economy is self-regulating,then Smith

Accepted Answer

A)  is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones,who believes the economy is not self-regulating. 
B)  is more likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones,who believes the economy is not self-regulating. 
C)  will believe that there is zero crowding out,too. 
D)  will believe that wages are inflexible downward,too. 
E)  b and d 
A)  is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones,who believes the economy is not self-regulating. 
B)  is more likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones,who believes the economy is not self-regulating. 
C)  will believe that there is zero crowding out,too. 
D)  will believe that wages are inflexible downward,too. 
E)  b and d

Question 16

Tax revenues can be found by

Accepted Answer

A)  multiplying the tax base by the (average)tax rate. 
B)  dividing the tax base by the (average)tax rate. 
C)  summing the tax base and the (average)tax rate. 
D)  multiplying taxable income by the marginal tax rate. 
A)  multiplying the tax base by the (average)tax rate. 
B)  dividing the tax base by the (average)tax rate. 
C)  summing the tax base and the (average)tax rate. 
D)  multiplying taxable income by the marginal tax rate.

Question 17

To eliminate a recessionary gap,Keynesian theory indicates that government should

Accepted Answer

A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  b or c 
A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  b or c

Question 18

The Laffer curve shows the exclusively direct relationship that exists between tax rates and tax revenues.

Accepted Answer

A) True 
 B)False

Question 19

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

Accepted Answer

A)  net 
B)  gross 
C)  cyclical 
D)  structural 
A)  net 
B)  gross 
C)  cyclical 
D)  structural

Question 20

If a person predicts that a cut in income tax rates will decrease income tax revenues,he or she implicitly assumes that the percentage __________ in the tax base will be __________ the percentage cut in the tax rate.

Accepted Answer

A)  rise; less than 
B)  rise; greater than 
C)  rise; equal to 
D)  fall; equal to 
E)  none of the above 
A)  rise; less than 
B)  rise; greater than 
C)  rise; equal to 
D)  fall; equal to 
E)  none of the above

Exam 11: Monopolistic Competition, oligopoly, and Game Theory

Fiscal policy is implemented primarily by

Keynesians

The Laffer curve illustrates that

Over the past 50 years in the United States,tax revenues as a percentage of GDP have tended to be in the __________________ percent range.

Which of the following is an example of crowding out?

Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $500 million.This is an example of

As a result of crowding out,demand-side fiscal policy may be ineffective at achieving certain macroeconomic goals.

A subsidy is the same thing as a tax deduction

Some economists believe that permanently lower marginal income tax rates __________ the incentive to work and thus shift the __________.

Increased government spending and tax cuts characterize

-Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is no crowding out.As a result,the aggregate demand (AD)curve in the exhibit

Which of the following is an example of automatic fiscal policy?

Complete crowding out occurs when an increase in government spending is completely offset by an equal increase in tax revenues.

Which of the following statements is true?

If Smith believes the economy is self-regulating,then Smith

Tax revenues can be found by

To eliminate a recessionary gap,Keynesian theory indicates that government should

The Laffer curve shows the exclusively direct relationship that exists between tax rates and tax revenues.

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

If a person predicts that a cut in income tax rates will decrease income tax revenues,he or she implicitly assumes that the percentage __________ in the tax base will be __________ the percentage cut in the tax rate.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

Some economists believe that permanently lower marginal income tax rates the incentive to work and thus shift the .

If a person predicts that a cut in income tax rates will decrease income tax revenues,he or she implicitly assumes that the percentage in the tax base will be the percentage cut in the tax rate.