Question 1

Government-provided unemployment insurance is an example of

Accepted Answer

A) a discretionary fiscal stabilizer. 
B) an automatic fiscal stabilizer. 
C) a monetary stabilizer. 
D) an automatic monetary stabilizer. 
A) a discretionary fiscal stabilizer. 
B) an automatic fiscal stabilizer. 
C) a monetary stabilizer. 
D) an automatic monetary stabilizer. B

Question 2

-Refer to the above figure.If the relevant aggregate demand curve is   ,then the economy is experiencing

Accepted Answer

A) an inflationary gap. 
B) a recessionary gap. 
C) a deflationary gap. 
D) full employment. 
A) an inflationary gap. 
B) a recessionary gap. 
C) a deflationary gap. 
D) full employment. D

Question 3

Suppose that real GDP is initially $14 trillion and the government attempts to increase real GDP to $15 trillion.The marginal propensity to consume is 0.8,and every $1.00 increase in real government spending crowds out $0.50 in real planned investment expenditures.Which increase in government spending below could yield the desired level of real GDP?

Accepted Answer

A) $100 billion 
B) $125 billion 
C) $200 billion 
D) $400 billion 
A) $100 billion 
B) $125 billion 
C) $200 billion 
D) $400 billion D

Question 4

To close a recessionary gap through fiscal policy,the government should

Accepted Answer

A) decrease government spending in order to increase aggregate supply. 
B) increase government spending in order to increase aggregate demand. 
C) reduce taxes in order to stimulate investment,and thus increase aggregate supply. 
D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply. 
A) decrease government spending in order to increase aggregate supply. 
B) increase government spending in order to increase aggregate demand. 
C) reduce taxes in order to stimulate investment,and thus increase aggregate supply. 
D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply.

Question 5

What are the effects of fiscal policy during normal times? What are the effects of fiscal policy during abnormal times?

Accepted Answer

During normal times,discretionary fiscal

Question 6

The government has decided to give every person in the U.S.a $5 coupon that they can use at the grocery store to purchase their choice of cheese.We would expect this policy to lead to

Accepted Answer

A) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable. 
B) no increase in aggregate demand due to the Ricardian equivalence theorem. 
C) no increase in aggregate demand because there would be no direct expenditure offset. 
D) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset. 
A) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable. 
B) no increase in aggregate demand due to the Ricardian equivalence theorem. 
C) no increase in aggregate demand because there would be no direct expenditure offset. 
D) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset.

Question 7

Fiscal policy may end up being destabilizing to an economy because

Accepted Answer

A) there is never a long enough time lag. 
B) the economy is almost always at full employment. 
C) the President may have different goals than Congress. 
D) various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve. 
A) there is never a long enough time lag. 
B) the economy is almost always at full employment. 
C) the President may have different goals than Congress. 
D) various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve.

Question 8

In the short run,if the government attempts to increase aggregate demand,it should

Accepted Answer

A) increase government spending and reduce taxes. 
B) decrease government spending and increase taxes. 
C) shift the long-run aggregate supply curve to the right. 
D) shift the short-run aggregate supply curve to the right. 
A) increase government spending and reduce taxes. 
B) decrease government spending and increase taxes. 
C) shift the long-run aggregate supply curve to the right. 
D) shift the short-run aggregate supply curve to the right.

Question 9

Which of the following might be considered an automatic fiscal stabilizer?

Accepted Answer

A) government spending for the war effort 
B) 401(k)retirement program 
C) unemployment compensation 
D) government budgeting for education 
A) government spending for the war effort 
B) 401(k)retirement program 
C) unemployment compensation 
D) government budgeting for education

Question 10

According to the traditional Keynesian analysis,if the government increases spending by $10 million,then

Accepted Answer

A) consumption will increase,and so total expenditures will increase by more than $10 million. 
B) consumption will decrease,and so total expenditures will increase by less than the $10 million. 
C) consumption will remain the same,and so total expenditures will increase by exactly $10 million. 
D) consumption will increase or decrease,and so total expenditures will increase or decrease depending on the change in consumption. 
A) consumption will increase,and so total expenditures will increase by more than $10 million. 
B) consumption will decrease,and so total expenditures will increase by less than the $10 million. 
C) consumption will remain the same,and so total expenditures will increase by exactly $10 million. 
D) consumption will increase or decrease,and so total expenditures will increase or decrease depending on the change in consumption.

Question 11

Supply-side economics focuses attention on how fiscal policy might be used to

Accepted Answer

A) increase aggregate demand to the full-employment level of real GDP. 
B) shift the aggregate supply curve out. 
C) align aggregate demand and aggregate supply. 
D) increase consumption. 
A) increase aggregate demand to the full-employment level of real GDP. 
B) shift the aggregate supply curve out. 
C) align aggregate demand and aggregate supply. 
D) increase consumption.

Question 12

To the extent that the Ricardian equivalence theorem is true,which of the conditions below will hold?

Accepted Answer

A) Increases in the government budget deficit will not affect aggregate demand. 
B) Exports will not be considered part of aggregate demand. 
C) Investment spending will not be considered part of aggregate demand. 
D) The long-run aggregate supply curve will not be vertical. 
A) Increases in the government budget deficit will not affect aggregate demand. 
B) Exports will not be considered part of aggregate demand. 
C) Investment spending will not be considered part of aggregate demand. 
D) The long-run aggregate supply curve will not be vertical.

Question 13

Which of the following is an example of an automatic stabilizer?

Accepted Answer

A) cost of living adjustments to Social Security payments 
B) unemployment benefits 
C) a temporary tax rebate 
D) all of the above 
A) cost of living adjustments to Social Security payments 
B) unemployment benefits 
C) a temporary tax rebate 
D) all of the above

Question 14

The idea that creating incentives for individuals and firms to increase productivity leading to an increase in long-run aggregate supply is

Accepted Answer

A) supply-side economics. 
B) demand-side economics. 
C) the Ricardian equivalence theorem. 
D) consistent with crowding out. 
A) supply-side economics. 
B) demand-side economics. 
C) the Ricardian equivalence theorem. 
D) consistent with crowding out.

Question 15

Which one of the following is true about the effects of fiscal policy?

Accepted Answer

A) A decrease government spending will increase aggregate supply. 
B) A tax change does not have any direct or indirect effects on aggregate demand. 
C) A decrease in government spending will decrease aggregate demand. 
D) An increase in government spending will reduce aggregate demand. 
A) A decrease government spending will increase aggregate supply. 
B) A tax change does not have any direct or indirect effects on aggregate demand. 
C) A decrease in government spending will decrease aggregate demand. 
D) An increase in government spending will reduce aggregate demand.

Question 16

To compensate for the possibility of indirect crowding out,a government engaging in expansionary policy aimed at eliminating a recessionary gap could

Accepted Answer

A) increase spending less than the simplest Keynesian model would predict. 
B) increase spending more than the simplest Keynesian model would predict. 
C) reduce taxes rather than increase government spending. 
D) both reduce taxes and reduce spending to be able to achieve full employment. 
A) increase spending less than the simplest Keynesian model would predict. 
B) increase spending more than the simplest Keynesian model would predict. 
C) reduce taxes rather than increase government spending. 
D) both reduce taxes and reduce spending to be able to achieve full employment.

Question 17

A problem with using fiscal policy to fine-tune the economy is that

Accepted Answer

A) agreeing on the appropriate fiscal policy is time consuming. 
B) fiscal policy impacts the economy too fast. 
C) fiscal policy impacts only urban areas of the nation. 
D) fiscal policy impacts only the largest states in the nation. 
A) agreeing on the appropriate fiscal policy is time consuming. 
B) fiscal policy impacts the economy too fast. 
C) fiscal policy impacts only urban areas of the nation. 
D) fiscal policy impacts only the largest states in the nation.

Question 18

Discretionary fiscal policy is

Accepted Answer

A) automatic changes in government expenditures and interest rates that achieve certain national economic goals. 
B) deliberate changes in government expenditures or taxes in order to achieve certain national economic goals. 
C) used to achieve full employment by changing monetary growth targets. 
D) changes in support for research and education in order to achieve certain national economic goals. 
A) automatic changes in government expenditures and interest rates that achieve certain national economic goals. 
B) deliberate changes in government expenditures or taxes in order to achieve certain national economic goals. 
C) used to achieve full employment by changing monetary growth targets. 
D) changes in support for research and education in order to achieve certain national economic goals.

Question 19

In the traditional Keynesian model,if the government cuts current taxes,

Accepted Answer

A) the C + I + G + X line will shift down but the aggregate demand curve will not shift. 
B) the C + I + G + X line will shift down and the aggregate demand curve will shift to the left. 
C) the C + I + G + X line will shift up and the aggregate demand curve will shift to the right. 
D) the C + I + G + X line will shift up but the aggregate demand curve will not shift. 
A) the C + I + G + X line will shift down but the aggregate demand curve will not shift. 
B) the C + I + G + X line will shift down and the aggregate demand curve will shift to the left. 
C) the C + I + G + X line will shift up and the aggregate demand curve will shift to the right. 
D) the C + I + G + X line will shift up but the aggregate demand curve will not shift.

Question 20

-Refer to the above figure.If the relevant aggregate demand curve is   ,what is the current economic situation?

Accepted Answer

A) inflationary gap 
B) recessionary gap 
C) equilibrium 
D) overemployment 
A) inflationary gap 
B) recessionary gap 
C) equilibrium 
D) overemployment

Government-provided unemployment insurance is an example of

-Refer to the above figure.If the relevant aggregate demand curve is ,then the economy is experiencing

To close a recessionary gap through fiscal policy,the government should

What are the effects of fiscal policy during normal times? What are the effects of fiscal policy during abnormal times?

The government has decided to give every person in the U.S.a $5 coupon that they can use at the grocery store to purchase their choice of cheese.We would expect this policy to lead to

Fiscal policy may end up being destabilizing to an economy because

In the short run,if the government attempts to increase aggregate demand,it should

Which of the following might be considered an automatic fiscal stabilizer?

According to the traditional Keynesian analysis,if the government increases spending by $10 million,then

Supply-side economics focuses attention on how fiscal policy might be used to

To the extent that the Ricardian equivalence theorem is true,which of the conditions below will hold?

Which of the following is an example of an automatic stabilizer?

The idea that creating incentives for individuals and firms to increase productivity leading to an increase in long-run aggregate supply is

Which one of the following is true about the effects of fiscal policy?

To compensate for the possibility of indirect crowding out,a government engaging in expansionary policy aimed at eliminating a recessionary gap could

A problem with using fiscal policy to fine-tune the economy is that

Discretionary fiscal policy is

In the traditional Keynesian model,if the government cuts current taxes,

-Refer to the above figure.If the relevant aggregate demand curve is ,what is the current economic situation?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 13: Fiscal Policy

Government-provided unemployment insurance is an example of

-Refer to the above figure.If the relevant aggregate demand curve is ,then the economy is experiencing

To close a recessionary gap through fiscal policy,the government should

What are the effects of fiscal policy during normal times? What are the effects of fiscal policy during abnormal times?

The government has decided to give every person in the U.S.a $5 coupon that they can use at the grocery store to purchase their choice of cheese.We would expect this policy to lead to

Fiscal policy may end up being destabilizing to an economy because

In the short run,if the government attempts to increase aggregate demand,it should

Which of the following might be considered an automatic fiscal stabilizer?

According to the traditional Keynesian analysis,if the government increases spending by $10 million,then

Supply-side economics focuses attention on how fiscal policy might be used to

To the extent that the Ricardian equivalence theorem is true,which of the conditions below will hold?

Which of the following is an example of an automatic stabilizer?

The idea that creating incentives for individuals and firms to increase productivity leading to an increase in long-run aggregate supply is

Which one of the following is true about the effects of fiscal policy?

To compensate for the possibility of indirect crowding out,a government engaging in expansionary policy aimed at eliminating a recessionary gap could

A problem with using fiscal policy to fine-tune the economy is that

Discretionary fiscal policy is

In the traditional Keynesian model,if the government cuts current taxes,

-Refer to the above figure.If the relevant aggregate demand curve is ,what is the current economic situation?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters