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Deck 9: The Government and Fiscal Policy
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Question
Question
Question
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 $1,200 billion, the level of aggregate expenditure is
A) $1,000 billion.
B) $1,200 billion.
C) $1,300 billion.
D) $1,400 billion.
Table 9.1
Refer to Table 9.1. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,000 billion.
B) $1,200 billion.
C) $1,300 billion.
D) $1,400 billion.
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Question
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
A) $1,500 billion.
B) $1,800 billion.
C) $1,900 billion.
D) $2,000 billion.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, the level of aggregate expenditure is
A) $1,500 billion.
B) $1,800 billion.
C) $1,900 billion.
D) $2,000 billion.
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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 $1,200 billion, there is an unplanned inventory change of
A) positive $10 billion.
B) zero.
C) negative $100 billion.
D) positive $100 billion.
Table 9.1
Refer to Table 9.1. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $10 billion.
B) zero.
C) negative $100 billion.
D) positive $100 billion.
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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 the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $100
C) $200
D) $300
Table 9.1
Refer to Table 9.1. At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $100
C) $200
D) $300
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500, disposable income
A) is $1,000.
B) is $1,200.
C) is $1,400.
D) cannot be determined from this information.
Table 9.2
Refer to Table 9.2. At an output level of $1,500, disposable income
A) is $1,000.
B) is $1,200.
C) is $1,400.
D) cannot be determined from this information.
Question
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, there is an unplanned inventory
A) decrease of $200 billion.
B) change of $0.
C) increase of $100 billion.
D) increase of $150 billion.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, there is an unplanned inventory
A) decrease of $200 billion.
B) change of $0.
C) increase of $100 billion.
D) increase of $150 billion.
Question
Question
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 $1,200 billion, there is a tendency for output
A) to fall.
B) to increase.
C) to remain constant.
D) to either increase or decrease.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion, there is a tendency for output
A) to fall.
B) to increase.
C) to remain constant.
D) to either increase or decrease.
Question
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 value of saving
A) cannot be determined from the given information.
B) is $300 billion.
C) is $200 billion.
D) is $100 billion.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, the value of saving
A) cannot be determined from the given information.
B) is $300 billion.
C) is $200 billion.
D) is $100 billion.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.
A) $1,300
B) $1,400
C) $1,500
D) $1,600
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.
A) $1,300
B) $1,400
C) $1,500
D) $1,600
Question
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1. The equilibrium level of output is ________ billion.
A) $800
B) $1,200
C) $1,600
D) $2,000
Table 9.1
Refer to Table 9.1. The equilibrium level of output is ________ billion.
A) $800
B) $1,200
C) $1,600
D) $2,000
Question
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, there is an unplanned inventory change of
A) positive $100 billion.
B) positive $10 billion.
C) negative $100 billion.
D) zero.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) positive $10 billion.
C) negative $100 billion.
D) zero.
Question
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is an unplanned inventory
A) increase of $300 billion.
B) decrease of $200 billion.
C) change of $0.
D) increase of $200 billion.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is an unplanned inventory
A) increase of $300 billion.
B) decrease of $200 billion.
C) change of $0.
D) increase of $200 billion.
Question
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.
A) $800
B) $700
C) $600
D) $500
Table 9.1
Refer to Table 9.1. At an output level of $800 billion, disposable income equals ________ billion.
A) $800
B) $700
C) $600
D) $500
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. The equilibrium level of output is ________ billion.
A) $1000
B) $1,500
C) $2,000
D) $2,500
Table 9.2
Refer to Table 9.2. The equilibrium level of output is ________ billion.
A) $1000
B) $1,500
C) $2,000
D) $2,500
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is a tendency for output
A) to increase.
B) to remain constant.
C) to either increase or decrease.
D) to fall.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is a tendency for output
A) to increase.
B) to remain constant.
C) to either increase or decrease.
D) to fall.
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2 At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $300
C) $500
D) $200
Table 9.2
Refer to Table 9.2 At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $300
C) $500
D) $200
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level for saving
A) is $300.
B) is $400.
C) is $500.
D) cannot be determined from this information.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level for saving
A) is $300.
B) is $400.
C) is $500.
D) cannot be determined from this information.
Question
Question
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level of aggregate expenditure is ________ billion.
A) $1,500
B) $2,000
C) $2,200
D) $2,300
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level of aggregate expenditure is ________ billion.
A) $1,500
B) $2,000
C) $2,200
D) $2,300
Question
Question
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
A) the part of consumption that is dependent on income.
B) the part of consumption that is not dependent on income.
C) equilibrium income.
D) both A and B are correct
Figure 9.1Refer to Figure 9.1. At equilibrium, $1,000 billion represents
A) the part of consumption that is dependent on income.
B) the part of consumption that is not dependent on income.
C) equilibrium income.
D) both A and B are correct
Question
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.
A) 1,500
B) 2,000
C) 3,000
D) 4,000
Figure 9.1Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.
A) 1,500
B) 2,000
C) 3,000
D) 4,000
Question
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 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $1,100
B) $1,250
C) $1,350
D) $1,800
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 200 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $1,100
B) $1,250
C) $1,350
D) $1,800
Question
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $2,000
B) $1,350
C) $1,300
D) $1,150
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $2,000
B) $1,350
C) $1,300
D) $1,150
Question
Question
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
A) $1,080 billion.
B) $840 billion.
C) $720 billion.
D) $650 billion.
Figure 9.1Refer 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
A) $1,080 billion.
B) $840 billion.
C) $720 billion.
D) $650 billion.
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. The MPC in this economy is
A) 0.4.
B) 0.5.
C) 0.6.
D) cannot be determined from the given information
Figure 9.1Refer to Figure 9.1. The MPC in this economy is
A) 0.4.
B) 0.5.
C) 0.6.
D) cannot be determined from the given information
Question
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, the part of consumption that is dependent on income equals $________ billion.
A) $2,000
B) $1,500
C) $1,000
D) cannot be determined from the given information
Figure 9.1Refer to Figure 9.1. At equilibrium, the part of consumption that is dependent on income equals $________ billion.
A) $2,000
B) $1,500
C) $1,000
D) cannot be determined from the given information
Question
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 = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. Injections = leakages
A) when income = zero.
B) when consumption = saving.
C) at equilibrium.
D) when output = investment.
Figure 9.1Refer to Figure 9.1. Injections = leakages
A) when income = zero.
B) when consumption = saving.
C) at equilibrium.
D) when output = investment.
Question
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Question
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, injections
A) can be greater than $1,000 billion.
B) equal $1,500 billion.
C) equal leakages.
D) equal $2,000 billion.
Figure 9.1Refer to Figure 9.1. At equilibrium, injections
A) can be greater than $1,000 billion.
B) equal $1,500 billion.
C) equal leakages.
D) equal $2,000 billion.
Question
Question
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. The equilibrium level of aggregate expenditure is $________ billion.
A) 4,000
B) 3,000
C) 2,000
D) 1,500
Figure 9.1Refer to Figure 9.1. The equilibrium level of aggregate expenditure is $________ billion.
A) 4,000
B) 3,000
C) 2,000
D) 1,500
Question
Question
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of injections are
A) $700 billion.
B) $650 billion.
C) $500 billion.
D) $350 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of injections are
A) $700 billion.
B) $650 billion.
C) $500 billion.
D) $350 billion.
Question
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. In this economy, 0.5 represents the
A) MPC.
B) MPS.
C) multiplier.
D) both A and B
Figure 9.1Refer to Figure 9.1. In this economy, 0.5 represents the
A) MPC.
B) MPS.
C) multiplier.
D) both A and B
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Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) zero.
C) negative $200 billion.
D) positive $200 billion.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) zero.
C) negative $200 billion.
D) positive $200 billion.
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Question
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,100 billion.
B) $1,250 billion.
C) $1,400 billion.
D) $1,450 billion.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,100 billion.
B) $1,250 billion.
C) $1,400 billion.
D) $1,450 billion.
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Deck 9: The Government and Fiscal Policy
1
During recessions, government spending usually
A) decreases because unemployment payments decrease.
B) increases because unemployment payments increase.
C) decrease because unemployment payments increase.
D) increases because unemployment payments decrease.
A) decreases because unemployment payments decrease.
B) increases because unemployment payments increase.
C) decrease because unemployment payments increase.
D) increases because unemployment payments decrease.
B
2
If output is less than planned aggregate expenditure, there will be
A) an unplanned increase in inventories.
B) an unplanned decrease in inventories.
C) no change in inventories.
D) a planned increase in inventories.
A) an unplanned increase in inventories.
B) an unplanned decrease in inventories.
C) no change in inventories.
D) a planned increase in inventories.
B
3
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 $1,200 billion, the level of aggregate expenditure is
A) $1,000 billion.
B) $1,200 billion.
C) $1,300 billion.
D) $1,400 billion.
Table 9.1
Refer to Table 9.1. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,000 billion.
B) $1,200 billion.
C) $1,300 billion.
D) $1,400 billion.
C
4
The aggregate consumption function is C = 100 + 0.6Yd. If income is $1,000 and net taxes are $300, consumption equals
A) 800.
B) 700.
C) 580.
D) 520.
A) 800.
B) 700.
C) 580.
D) 520.
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5
Which of the following is not a category of fiscal policy?
A) government policies regarding the purchase of goods and services
B) government policies regarding taxation
C) government policies regarding money supply in the economy
D) government policies regarding transfer payments and welfare benefits
A) government policies regarding the purchase of goods and services
B) government policies regarding taxation
C) government policies regarding money supply in the economy
D) government policies regarding transfer payments and welfare benefits
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6
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
A) $1,500 billion.
B) $1,800 billion.
C) $1,900 billion.
D) $2,000 billion.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, the level of aggregate expenditure is
A) $1,500 billion.
B) $1,800 billion.
C) $1,900 billion.
D) $2,000 billion.
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7
The aggregate consumption function is C = 800 + 0.8Yd. If income is $2,000 and net taxes are $500, consumption equals
A) 1,500.
B) 2,000.
C) 2,050.
D) 2,150.
A) 1,500.
B) 2,000.
C) 2,050.
D) 2,150.
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8
Fiscal policy refers to
A) the techniques used by a business firm to reduce its tax liability.
B) the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply.
C) the spending and taxing policies used by the government to influence the economy.
D) the government's ability to regulate a firm's behavior in the financial markets.
A) the techniques used by a business firm to reduce its tax liability.
B) the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply.
C) the spending and taxing policies used by the government to influence the economy.
D) the government's ability to regulate a firm's behavior in the financial markets.
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9
After government is added to the income-expenditure model, the formula for the aggregate consumption function is
A) C = a - b(Y - T).
B) C = a - b(T - Y).
C) C = a + b(Y + T).
D) C = a + b(Y - T).
A) C = a - b(Y - T).
B) C = a - b(T - Y).
C) C = a + b(Y + T).
D) C = a + b(Y - T).
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10
Disposable income
A) increases when net taxes increase.
B) increases when income increases.
C) decreases when saving increases.
D) increases when saving decreases.
A) increases when net taxes increase.
B) increases when income increases.
C) decreases when saving increases.
D) increases when saving decreases.
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11
The aggregate consumption function is C = 1,000 + 0.9Yd. If income is $3,600 and net taxes are $600, consumption equals
A) 2,400.
B) 3,400.
C) 3,700.
D) 4,000.
A) 2,400.
B) 3,400.
C) 3,700.
D) 4,000.
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12
When the government sector is included in the income-expenditure model, the equation for aggregate income is
A) Y = C + S - T.
B) Y = C + I.
C) Y = C + I + G.
D) Y = C + S + I.
A) Y = C + S - T.
B) Y = C + I.
C) Y = C + I + G.
D) Y = C + S + I.
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13
The aggregate consumption function is C = 100 + 0.8Yd. If income is $600 and net taxes are zero, consumption equals
A) zero.
B) 360.
C) 460.
D) 580.
A) zero.
B) 360.
C) 460.
D) 580.
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14
The difference between what a government spends and what it collects in taxes in a year is
A) net revenue.
B) net taxes.
C) the government budget deficit or surplus.
D) the government debt.
A) net revenue.
B) net taxes.
C) the government budget deficit or surplus.
D) the government debt.
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15
What determines tax revenues?
A) the income tax rate
B) the rate of interest
C) the money supply in the economy
D) the rate of inflation
A) the income tax rate
B) the rate of interest
C) the money supply in the economy
D) the rate of inflation
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16
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 $1,200 billion, there is an unplanned inventory change of
A) positive $10 billion.
B) zero.
C) negative $100 billion.
D) positive $100 billion.
Table 9.1
Refer to Table 9.1. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $10 billion.
B) zero.
C) negative $100 billion.
D) positive $100 billion.
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17
In 2016, the city of Miketown collected $250,000 in taxes and spent $350,000. In 2016, the city of Miketown had a
A) budget surplus of $100,000.
B) budget surplus of 57%.
C) budget deficit of $100,000.
D) budget deficit of $200,000.
A) budget surplus of $100,000.
B) budget surplus of 57%.
C) budget deficit of $100,000.
D) budget deficit of $200,000.
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18
In 2016, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2016, the city of Canfield had a
A) budget surplus of $450,000.
B) budget surplus of $50,000.
C) budget deficit of $50,000.
D) budget surplus of $5,000.
A) budget surplus of $450,000.
B) budget surplus of $50,000.
C) budget deficit of $50,000.
D) budget surplus of $5,000.
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19
Bill's income is $1,000 and his net taxes are $350. His disposable income is
A) $1,350.
B) $750.
C) $650.
D) -$350.
A) $1,350.
B) $750.
C) $650.
D) -$350.
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20
Which of the following is incorrect regarding tax revenues?
A) they increase during recessions
B) they change with changes in the tax rate
C) they are a revenue source in the government's budget
D) they increase during economic expansions
A) they increase during recessions
B) they change with changes in the tax rate
C) they are a revenue source in the government's budget
D) they increase during economic expansions
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21
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
A) $600.
B) $650.
C) $700.
D) $750.
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
A) $600.
B) $650.
C) $700.
D) $750.
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22
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 the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $100
C) $200
D) $300
Table 9.1
Refer to Table 9.1. At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $100
C) $200
D) $300
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23
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500, disposable income
A) is $1,000.
B) is $1,200.
C) is $1,400.
D) cannot be determined from this information.
Table 9.2
Refer to Table 9.2. At an output level of $1,500, disposable income
A) is $1,000.
B) is $1,200.
C) is $1,400.
D) cannot be determined from this information.
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24
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, saving equals
A) $400.
B) $450.
C) $500.
D) $550.
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, saving equals
A) $400.
B) $450.
C) $500.
D) $550.
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25
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, there is an unplanned inventory
A) decrease of $200 billion.
B) change of $0.
C) increase of $100 billion.
D) increase of $150 billion.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, there is an unplanned inventory
A) decrease of $200 billion.
B) change of $0.
C) increase of $100 billion.
D) increase of $150 billion.
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26
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, consumption equals
A) $3,100.
B) $3,250.
C) $3,400.
D) $3,625.
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, consumption equals
A) $3,100.
B) $3,250.
C) $3,400.
D) $3,625.
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27
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 $1,200 billion, there is a tendency for output
A) to fall.
B) to increase.
C) to remain constant.
D) to either increase or decrease.
Table 9.1
Refer to Table 9.1 At an output level of $1,200 billion, there is a tendency for output
A) to fall.
B) to increase.
C) to remain constant.
D) to either increase or decrease.
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28
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 value of saving
A) cannot be determined from the given information.
B) is $300 billion.
C) is $200 billion.
D) is $100 billion.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, the value of saving
A) cannot be determined from the given information.
B) is $300 billion.
C) is $200 billion.
D) is $100 billion.
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29
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.
A) $1,300
B) $1,400
C) $1,500
D) $1,600
Table 9.2
Refer to Table 9.2. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.
A) $1,300
B) $1,400
C) $1,500
D) $1,600
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30
Refer to the information provided in Table 9.1 below to answer the questions that follow.
Table 9.1
Refer to Table 9.1. The equilibrium level of output is ________ billion.
A) $800
B) $1,200
C) $1,600
D) $2,000
Table 9.1
Refer to Table 9.1. The equilibrium level of output is ________ billion.
A) $800
B) $1,200
C) $1,600
D) $2,000
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31
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, there is an unplanned inventory change of
A) positive $100 billion.
B) positive $10 billion.
C) negative $100 billion.
D) zero.
Table 9.1
Refer to Table 9.1. At an output level of $2,000 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) positive $10 billion.
C) negative $100 billion.
D) zero.
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32
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, the sum of investment and government purchases in Canada is
A) $1,800.
B) $1,750.
C) $1,500.
D) cannot be determined from the given information
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, the sum of investment and government purchases in Canada is
A) $1,800.
B) $1,750.
C) $1,500.
D) cannot be determined from the given information
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33
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is an unplanned inventory
A) increase of $300 billion.
B) decrease of $200 billion.
C) change of $0.
D) increase of $200 billion.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is an unplanned inventory
A) increase of $300 billion.
B) decrease of $200 billion.
C) change of $0.
D) increase of $200 billion.
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34
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.
A) $800
B) $700
C) $600
D) $500
Table 9.1
Refer to Table 9.1. At an output level of $800 billion, disposable income equals ________ billion.
A) $800
B) $700
C) $600
D) $500
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35
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. The equilibrium level of output is ________ billion.
A) $1000
B) $1,500
C) $2,000
D) $2,500
Table 9.2
Refer to Table 9.2. The equilibrium level of output is ________ billion.
A) $1000
B) $1,500
C) $2,000
D) $2,500
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36
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is a tendency for output
A) to increase.
B) to remain constant.
C) to either increase or decrease.
D) to fall.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, there is a tendency for output
A) to increase.
B) to remain constant.
C) to either increase or decrease.
D) to fall.
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37
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2 At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $300
C) $500
D) $200
Table 9.2
Refer to Table 9.2 At the equilibrium level of income, leakages equal ________ billion.
A) $0
B) $300
C) $500
D) $200
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38
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level for saving
A) is $300.
B) is $400.
C) is $500.
D) cannot be determined from this information.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level for saving
A) is $300.
B) is $400.
C) is $500.
D) cannot be determined from this information.
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39
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. The equilibrium level of output for the Italian economy is
A) $2,850.
B) $3,145.
C) $3,700.
D) $3,800.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
Refer to Equation 9.1. The equilibrium level of output for the Italian economy is
A) $2,850.
B) $3,145.
C) $3,700.
D) $3,800.
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40
Refer to the information provided in Table 9.2 below to answer the questions that follow.
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level of aggregate expenditure is ________ billion.
A) $1,500
B) $2,000
C) $2,200
D) $2,300
Table 9.2
Refer to Table 9.2. At an output level of $2,500, the level of aggregate expenditure is ________ billion.
A) $1,500
B) $2,000
C) $2,200
D) $2,300
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41
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, saving in Canada equals
A) $1,200.
B) $1,250.
C) $1,350.
D) $1,600.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, saving in Canada equals
A) $1,200.
B) $1,250.
C) $1,350.
D) $1,600.
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42
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
A) the part of consumption that is dependent on income.
B) the part of consumption that is not dependent on income.
C) equilibrium income.
D) both A and B are correct
Figure 9.1Refer to Figure 9.1. At equilibrium, $1,000 billion represents
A) the part of consumption that is dependent on income.
B) the part of consumption that is not dependent on income.
C) equilibrium income.
D) both A and B are correct
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43
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, government purchases in Canada is
A) $1,500.
B) $1,250.
C) $1,000.
D) cannot be determined from the given information
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium, government purchases in Canada is
A) $1,500.
B) $1,250.
C) $1,000.
D) cannot be determined from the given information
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44
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.
A) 1,500
B) 2,000
C) 3,000
D) 4,000
Figure 9.1Refer to Figure 9.1. Aggregate expenditures = aggregate output at $ ________ billion.
A) 1,500
B) 2,000
C) 3,000
D) 4,000
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45
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 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $1,100
B) $1,250
C) $1,350
D) $1,800
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 200 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $1,100
B) $1,250
C) $1,350
D) $1,800
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46
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $2,000
B) $1,350
C) $1,300
D) $1,150
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium, what is the value of consumption?
A) $2,000
B) $1,350
C) $1,300
D) $1,150
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47
Assuming there is no foreign trade in the economy, equilibrium is achieved when government purchases equal
A) saving minus net taxes minus consumption.
B) saving plus net taxes minus investment.
C) net taxes plus investment minus saving.
D) net taxes minus investment minus saving.
A) saving minus net taxes minus consumption.
B) saving plus net taxes minus investment.
C) net taxes plus investment minus saving.
D) net taxes minus investment minus saving.
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48
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
A) $1,080 billion.
B) $840 billion.
C) $720 billion.
D) $650 billion.
Figure 9.1Refer 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
A) $1,080 billion.
B) $840 billion.
C) $720 billion.
D) $650 billion.
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49
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. The MPC in this economy is
A) 0.4.
B) 0.5.
C) 0.6.
D) cannot be determined from the given information
Figure 9.1Refer to Figure 9.1. The MPC in this economy is
A) 0.4.
B) 0.5.
C) 0.6.
D) cannot be determined from the given information
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50
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, the part of consumption that is dependent on income equals $________ billion.
A) $2,000
B) $1,500
C) $1,000
D) cannot be determined from the given information
Figure 9.1Refer to Figure 9.1. At equilibrium, the part of consumption that is dependent on income equals $________ billion.
A) $2,000
B) $1,500
C) $1,000
D) cannot be determined from the given information
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51
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 = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 300 + 0.5Yd and taxes are $300 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
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52
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. Injections = leakages
A) when income = zero.
B) when consumption = saving.
C) at equilibrium.
D) when output = investment.
Figure 9.1Refer to Figure 9.1. Injections = leakages
A) when income = zero.
B) when consumption = saving.
C) at equilibrium.
D) when output = investment.
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53
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of autonomous consumption is
A) $400 billion.
B) $300 billion.
C) $200 billion.
D) $100 billion.
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54
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, injections
A) can be greater than $1,000 billion.
B) equal $1,500 billion.
C) equal leakages.
D) equal $2,000 billion.
Figure 9.1Refer to Figure 9.1. At equilibrium, injections
A) can be greater than $1,000 billion.
B) equal $1,500 billion.
C) equal leakages.
D) equal $2,000 billion.
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55
The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium leakages in Canada equal
A) $1,700.
B) $1,750.
C) $1,800.
D) $2,100.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
Refer to Equation 9.2. At equilibrium leakages in Canada equal
A) $1,700.
B) $1,750.
C) $1,800.
D) $2,100.
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56
If planned injections exceed leakages, output will
A) decrease.
B) increase.
C) remain constant.
D) either increase or decrease.
A) decrease.
B) increase.
C) remain constant.
D) either increase or decrease.
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57
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. The equilibrium level of aggregate expenditure is $________ billion.
A) 4,000
B) 3,000
C) 2,000
D) 1,500
Figure 9.1Refer to Figure 9.1. The equilibrium level of aggregate expenditure is $________ billion.
A) 4,000
B) 3,000
C) 2,000
D) 1,500
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58
Assuming there is no foreign trade in the economy, the economy is in equilibrium when
A) S + T = C + I.
B) I + G = S + T.
C) IT = S + G.
D) G + T = S + I.
A) S + T = C + I.
B) I + G = S + T.
C) IT = S + G.
D) G + T = S + I.
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59
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 = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of injections are
A) $700 billion.
B) $650 billion.
C) $500 billion.
D) $350 billion.
Figure 9.1Refer to Figure 9.1. Suppose that the consumption function is C = 400 + 0.5Yd and taxes are $200 billion, at equilibrium the value of injections are
A) $700 billion.
B) $650 billion.
C) $500 billion.
D) $350 billion.
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60
Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1
Refer to Figure 9.1. In this economy, 0.5 represents the
A) MPC.
B) MPS.
C) multiplier.
D) both A and B
Figure 9.1Refer to Figure 9.1. In this economy, 0.5 represents the
A) MPC.
B) MPS.
C) multiplier.
D) both A and B
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61
For the economy to be in equilibrium,
A) government purchases must equal tax revenue and saving must equal investment.
B) government purchases must equal the sum of tax revenue, saving and investment.
C) government purchases plus investment must equal saving plus tax revenue.
D) investment plus tax revenue must equal government purchases plus saving.
A) government purchases must equal tax revenue and saving must equal investment.
B) government purchases must equal the sum of tax revenue, saving and investment.
C) government purchases plus investment must equal saving plus tax revenue.
D) investment plus tax revenue must equal government purchases plus saving.
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62
Disposable income
A) decreases when net taxes decrease.
B) decreases when income decreases.
C) increases when saving decreases.
D) all of the above
A) decreases when net taxes decrease.
B) decreases when income decreases.
C) increases when saving decreases.
D) all of the above
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63
The spending and taxing policies used by the government to influence the economy refer to
A) monetary policy.
B) ad hoc policy.
C) fiscal policy.
D) trade policy.
A) monetary policy.
B) ad hoc policy.
C) fiscal policy.
D) trade policy.
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64
The formula for the aggregate consumption function is [C = a + b(Y - T)] ________ the income-expenditure model.
A) after government is subtracted from
B) after net exports are added to
C) when consumption is left out of
D) after government is added to
A) after government is subtracted from
B) after net exports are added to
C) when consumption is left out of
D) after government is added to
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65
[Y = C + I + G] when ________ in the income-expenditure model.
A) net exports are included
B) net imports are included
C) government is included
D) investment is excluded
A) net exports are included
B) net imports are included
C) government is included
D) investment is excluded
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66
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) zero.
C) negative $200 billion.
D) positive $200 billion.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, there is an unplanned inventory change of
A) positive $100 billion.
B) zero.
C) negative $200 billion.
D) positive $200 billion.
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67
Which of the following is correct regarding tax revenues?
A) they increase during recessions
B) they do not change with changes in the tax rate
C) they are the only revenue source in the government's budget
D) they decrease during economic slowdowns
A) they increase during recessions
B) they do not change with changes in the tax rate
C) they are the only revenue source in the government's budget
D) they decrease during economic slowdowns
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68
The aggregate consumption function is C = 100 + 0.5Yd. If income is $2,000 and net taxes are $400, consumption equals
A) 900.
B) 1,300.
C) 3,300.
D) 4,900.
A) 900.
B) 1,300.
C) 3,300.
D) 4,900.
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69
The aggregate consumption function is C = 150 + 0.75Yd. If income is $500 and net taxes are zero, consumption equals
A) 275.
B) 350.
C) 525.
D) 650.
A) 275.
B) 350.
C) 525.
D) 650.
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70
The ________ and the ________ determine tax revenues.
A) money supply; income tax rate
B) income of households; value of transfer payments
C) income tax rate; income of households
D) value of transfer payments; money supply
A) money supply; income tax rate
B) income of households; value of transfer payments
C) income tax rate; income of households
D) value of transfer payments; money supply
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71
Refer to the information provided in Table 9.3 below to answer the questions that follow.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,100 billion.
B) $1,250 billion.
C) $1,400 billion.
D) $1,450 billion.
Table 9.3
Refer to Table 9.3. At an output level of $1,200 billion, the level of aggregate expenditure is
A) $1,100 billion.
B) $1,250 billion.
C) $1,400 billion.
D) $1,450 billion.
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72
If output is greater than planned aggregate expenditure, there will be
A) an unplanned increase in inventories.
B) an unplanned decrease in inventories.
C) no change in inventories.
D) a planned increase in inventories.
A) an unplanned increase in inventories.
B) an unplanned decrease in inventories.
C) no change in inventories.
D) a planned increase in inventories.
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73
Which of the following is a category of fiscal policy?
A) government policies regarding the purchase of goods and services
B) government policies regarding taxation
C) government policies regarding transfer payments and welfare benefits
D) all of the above
A) government policies regarding the purchase of goods and services
B) government policies regarding taxation
C) government policies regarding transfer payments and welfare benefits
D) all of the above
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74
In 2016, the city of Sylvester collected $800,000 in taxes and spent $200,000. In 2016, the city of Sylvester had a
A) budget surplus of $200,000.
B) budget surplus of $600,000.
C) budget deficit of $200,000.
D) budget surplus of $1,000,000.
A) budget surplus of $200,000.
B) budget surplus of $600,000.
C) budget deficit of $200,000.
D) budget surplus of $1,000,000.
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75
Ryan's income is $1,700 and his net taxes are $700. His disposable income is
A) $2,400.
B) $1,700.
C) $1,000.
D) $700.
A) $2,400.
B) $1,700.
C) $1,000.
D) $700.
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76
The aggregate consumption function is C = 200 + 0.9Yd. If income is $1,500 and net taxes are $300, consumption equals
A) 1,280.
B) 1,820.
C) 2,000.
D) 2,180.
A) 1,280.
B) 1,820.
C) 2,000.
D) 2,180.
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77
The government budget deficit or surplus is the difference between what a government ________ and what it ________ in a year.
A) pays for imports; spends on exports
B) spends; collects in taxes
C) earns from transfers; pays in transfers
D) spends on programs; gives away in foreign aid
A) pays for imports; spends on exports
B) spends; collects in taxes
C) earns from transfers; pays in transfers
D) spends on programs; gives away in foreign aid
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78
The aggregate consumption function is C = 1,200 + 0.4Yd. If income is $3,000 and net taxes are $400, consumption equals
A) 1,760.
B) 2,240.
C) 2,560.
D) 2,760.
A) 1,760.
B) 2,240.
C) 2,560.
D) 2,760.
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79
In 2016, the city of Springfield collected $375,000 in taxes and spent $450,000. In 2016, the city of Springfield had a
A) budget surplus of $825,000.
B) budget surplus of $75,000.
C) budget deficit of $125,000.
D) budget deficit of $75,000.
A) budget surplus of $825,000.
B) budget surplus of $75,000.
C) budget deficit of $125,000.
D) budget deficit of $75,000.
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80
Planned aggregate expenditure increases when ________ in the income-expenditure model.
A) the government sector is included
B) the government sector is excluded
C) investment is excluded
D) consumption is excluded
A) the government sector is included
B) the government sector is excluded
C) investment is excluded
D) consumption is excluded
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Unlock Deck
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Unlock Deck
Unlock for access to all 362 flashcards in this deck.
