Question 1

Exhibit 15-3  Aggregate demand and supply model 1 and the marginal propensity to consume (MPC)  is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by: A)  $200 billion. B)  $250 billion. C)  $500 billion. D)  $1 trillion." class="answers-bank-image d-inline" rel="preload" > Suppose the economy in Exhibit 15-3 is in equilibrium at point E1 and the marginal propensity to consume (MPC)  is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

Accepted Answer

A)   $200 billion.
B)   $250 billion.
C)   $500 billion.
D)   $1 trillion.

Question 2

The Keynesian analysis of fiscal policy argues that:

Accepted Answer

A)   fiscal policy should generally be expansionary except during periods of economic recession.
B)   fiscal policy should generally be restrictive except during inflationary booms.
C)   the federal budget should be balanced annually except during war.
D)   the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

Question 3

The Laffer curve shows the relationship between tax:

Accepted Answer

A)   revenue and tax rates.
B)   revenue and take-home pay.
C)   revenue and government spending.
D)   rates and take-home pay.
E)   rates and government spending.

Question 4

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

Accepted Answer

A)   decreasing tax revenues by $600 billion.
B)   decreasing government spending by $200 billion.
C)   increasing tax revenues by $200 billion.
D)   increasing government purchases by $150 billion.

Question 5

If consumption is $800 when income is $1,000, the marginal propensity to consume (MPC) must be 0.80.

Accepted Answer

A) True 
 B)False

Question 6

The marginal propensity to consume (MPC)  is computed as the change in consumption divided by the change in:

Accepted Answer

A)   GDP.
B)   income.
C)   saving.
D)   none of the above.

Question 7

If the marginal propensity to consume is 0.80, the value of the spending multiplier will be 5.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is emphasized by supply-side economics?

Accepted Answer

A)   The impact of budget deficits on interest rates and aggregate demand.
B)   The impact of government spending on aggregate demand, output, and employment.
C)   The impact of marginal tax rates on aggregate supply.
D)   The impact of budget deficits on the rate of taxation in the future.

Question 9

As the marginal propensity to consume (MPC)  increases, the spending multiplier:

Accepted Answer

A)   increases.
B)   decreases.
C)   remains constant.
D)   becomes undefinable.

Question 10

If the marginal propensity to save (MPS)  is 0.10, the value of the spending multiplier is:

Accepted Answer

A)   1.
B)   9.
C)   10.
D)   90.

Question 11

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC)  is 0.90, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending) . If an increase of $1,000 billion aggregate demand can restore full employment, the government should:

Accepted Answer

A)   increase spending by $100 billion.
B)   decrease spending by $790 billion.
C)   increase spending by $1,000 billion.
D)   increase spending by $250 billion.

Question 12

Exhibit 15-8  Aggregate demand and supply curves 1 to AS2 would occur if the government: A)  increased tax rates and increased the amount of government regulation. B)  increased tax rates and decreased the amount of government regulation C)  increased tax rates and decreased the amount of government regulation. D)  decreased tax rates and decreased the amount of government regulation. E)  decreased tax rates and decreased the amount of government regulation" class="answers-bank-image d-inline" rel="preload" > In Exhibit 15-8, supply-siders claimed that the shift from AS1 to AS2 would occur if the government:

Accepted Answer

A)   increased tax rates and increased the amount of government regulation.
B)   increased tax rates and decreased the amount of government regulation
C)   increased tax rates and decreased the amount of government regulation.
D)   decreased tax rates and decreased the amount of government regulation.
E)   decreased tax rates and decreased the amount of government regulation

Question 13

According to the Laffer curve, when the tax rate is 100 percent, tax revenue will be:

Accepted Answer

A)   0.
B)   at the maximum value.
C)   the same as it would be at a 50 percent tax rate.
D)   greater than it would be at a 50 percent tax rate.
E)   the same as it would be at a 20 percent tax rate.

Question 14

Exhibit 15-3  Aggregate demand and supply model 1, and the marginal propensity to consume (MPC)  is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by: A)  $0.20 trillion. B)  $250 billion. C)  $0.50 trillion. D)  $1 trillion." class="answers-bank-image d-inline" rel="preload" > Suppose the economy in Exhibit 15-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC)  is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Accepted Answer

A)   $0.20 trillion.
B)   $250 billion.
C)   $0.50 trillion.
D)   $1 trillion.

Question 15

An expansionary fiscal policy may include:

Accepted Answer

A)   increases in government spending.
B)   discretionary increases in transfer payments.
C)   reductions in taxes.
D)   All of the above.

Question 16

Assume the marginal propensity to consume (MPC)  is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the:

Accepted Answer

A)   left by $80 billion.
B)   right by $200 billion.
C)   right by $400 billion.
D)   left by $400 billion.

Question 17

The tax multiplier is equal to the spending multiplier.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 15-3  Aggregate demand and supply model 1, and the marginal propensity to consume (MPC)  is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by: A)  $0.20 trillion. B)  $1 trillion. C)  $0.5 trillion. D)  $0.25 trillion." class="answers-bank-image d-inline" rel="preload" > Suppose the economy in Exhibit 15-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC)  is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Accepted Answer

A)   $0.20 trillion.
B)   $1 trillion.
C)   $0.5 trillion.
D)   $0.25 trillion.

Question 19

If the marginal propensity to consume (MPC)  is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?

Accepted Answer

A)   $140 million.
B)   $100 million.
C)   $200 million.
D)   $400 million.

Question 20

The nation has its own MPC. When national income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Accepted Answer

A)   0.2.
B)   0.5.
C)   0.6.
D)   0.67.
E)   1.33.

Exam 15: Fiscal Policy

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct Answer
verified

Which of the following is emphasized by supply-side economics?

Correct Answer
verified

If the marginal propensity to consume is 0.80, the value of the spending multiplier will be 5.

Correct Answer
verified

The Keynesian analysis of fiscal policy argues that:

Correct Answer
verified

If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?

Correct Answer
verified

An expansionary fiscal policy may include:

Correct Answer
verified

Exhibit 15-8 Aggregate demand and supply curves In Exhibit 15-8, supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

Correct Answer
verified

The marginal propensity to consume (MPC) is computed as the change in consumption divided by the change in:

Correct Answer
verified

According to the Laffer curve, when the tax rate is 100 percent, tax revenue will be:

Correct Answer
verified

Assume the marginal propensity to consume (MPC) is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the:

Correct Answer
verified

As the marginal propensity to consume (MPC) increases, the spending multiplier:

Correct Answer
verified

If consumption is $800 when income is $1,000, the marginal propensity to consume (MPC) must be 0.80.

Correct Answer
verified

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

Correct Answer
verified

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

Correct Answer
verified

If the marginal propensity to save (MPS) is 0.10, the value of the spending multiplier is:

Correct Answer
verified

The nation has its own MPC. When national income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Correct Answer
verified

The Laffer curve shows the relationship between tax:

Correct Answer
verified

Correct Answer
verified

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct Answer
verified

The tax multiplier is equal to the spending multiplier.

Correct Answer
verified

Exam 15: Fiscal Policy

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct AnswerverifiedShow Answer

Which of the following is emphasized by supply-side economics?

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.80, the value of the spending multiplier will be 5.

Correct AnswerverifiedShow Answer

The Keynesian analysis of fiscal policy argues that:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?

Correct AnswerverifiedShow Answer

An expansionary fiscal policy may include:

Correct AnswerverifiedShow Answer

Exhibit 15-8 Aggregate demand and supply curves In Exhibit 15-8, supply-siders claimed that the shift from AS1 to AS2 would occur if the government:

Correct AnswerverifiedShow Answer

The marginal propensity to consume (MPC) is computed as the change in consumption divided by the change in:

Correct AnswerverifiedShow Answer

According to the Laffer curve, when the tax rate is 100 percent, tax revenue will be:

Correct AnswerverifiedShow Answer

Assume the marginal propensity to consume (MPC) is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the:

Correct AnswerverifiedShow Answer

As the marginal propensity to consume (MPC) increases, the spending multiplier:

Correct AnswerverifiedShow Answer

If consumption is $800 when income is $1,000, the marginal propensity to consume (MPC) must be 0.80.

Correct AnswerverifiedShow Answer

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

Correct AnswerverifiedShow Answer

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

Correct AnswerverifiedShow Answer

If the marginal propensity to save (MPS) is 0.10, the value of the spending multiplier is:

Correct AnswerverifiedShow Answer

The nation has its own MPC. When national income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Correct AnswerverifiedShow Answer

The Laffer curve shows the relationship between tax:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E1, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct AnswerverifiedShow Answer

The tax multiplier is equal to the spending multiplier.

Correct AnswerverifiedShow Answer

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Exhibit 15-8 Aggregate demand and supply curves In Exhibit 15-8, supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 15-3 Aggregate demand and supply model Suppose the economy in Exhibit 15-3 is in equilibrium at point E₁, and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should cut taxes by:

Correct Answer
verified

Correct Answer
verified