Exam 9: The Government and Fiscal Policy

The Italian economy can be characterized by Equation 9.1. EQUATION 9.1: C = 300 + 0.8Yd G = 400 T = 200 I = 200 -Refer to Equation 9.1. At the equilibrium level of output in Italy, leakages equal

If taxes depend on income and the MPC is 0.8 and t is 0.4, the tax multiplier is

Refer to the information provided in Table 9.6 below to answer the questions that follow. Table 9.6 All Figures in Billions of Dollars -Refer to Table 9.6. The value of the government spending multiplier

The food stamp program is an example of

If the economy's full-employment output is $12 trillion, actual output is $12 trillion, and the budget deficit is $40 billion, the deficit in this case is known as a

When a government runs a surplus

If taxes are a lump sum amount, then the AE function is

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. Suppose that the consumption function is C = 200 + 0.4Yd and taxes are $200 billion, at equilibrium the value of injections are

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1. At an output level of $800 billion, disposable income equals ________ billion.

Related to the Economics in Practice on p. 176: In 2014, the Congressional Budget Office estimated that the federal debt was ________ percent of GDP.

Refer to the information provided in Figure 9.5 below to answer the questions that follow. Figure 9.5 -Refer to Figure 9.5. If the economy is in equilibrium and the government increases spending by $200 billion, equilibrium aggregate expenditures increase to $________ billion.

Refer to the information provided in Table 9.4 below to answer the questions that follow. Table 9.4 -Refer to Table 9.4 At the equilibrium level of income, leakages equal ________ billion.

During a recession, unemployment ________, tax revenue ________, and the budget deficit ________.

The Prime Minister of Richlandia hires you as an economic consultant. He is concerned that the output level in Richlandia is too low and that this will cause unemployment to rise. He feels that it is necessary to increase output by $20 billion. He tells you that the MPC in Richlandia is 0.75. Which of the following would be the best advice to give to the Richlandian Prime Minister?

Assuming there is no foreign trade in the economy, equilibrium is achieved when ________ equal [saving + net taxes - investment].

Refer to the information provided in Table 9.1 below to answer the questions that follow. Table 9.1 -Refer to Table 9.1. At an output level of $2,000 billion, the level of aggregate expenditure is

What is the largest source of revenue in the government's budget?

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. At equilibrium, $1,000 billion represents

When taxes are a function of income as opposed to a lump sum amount, the AE function becomes flatter.

The aggregate consumption function is C = 150 + 0.75Yd. If income is $500 and net taxes are zero, consumption equals