Question 1

Which of the following best describes supply-side economics?

Accepted Answer

A)  Labor productivity affects aggregate supply.
B)  Education affects labor productivity which affects aggregate supply.
C)  Education affects the incentive to work,save,and invest and,therefore,aggregate supply.
D)  Tax rates,particularly marginal tax rates,affect the incentive to work,save,and invest and,therefore,aggregate supply.

Question 2

Congress and the president carry out fiscal policy through changes in

Accepted Answer

A)  interest rates and the money supply.
B)  taxes and the interest rate.
C)  government purchases and the money supply.
D)  government purchases and taxes.

Question 3

The largest source of federal government revenue in 2010 was

Accepted Answer

A)  sales taxes.
B)  corporate income taxes.
C)  individual income taxes.
D)  payroll taxes to fund Social Security and Medicare programs.

Question 4

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that during wartime,the government purchases multiplier would be ________ the administration's estimate,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that when short-term interest rates are near zero,the multiplier would be ________ the administration's estimate.

Accepted Answer

A)  higher than;lower than
B)  lower than;higher than
C)  higher than;equal to
D)  equal to;lower than

Question 5

From the 1960s to 2010,transfer payments

Accepted Answer

A)  have risen from about 25 percent to 46 percent of federal government expenditures.
B)  remained the same percentage of total federal government expenditures.
C)  have declined by half as a percentage of total federal government expenditures.
D)  have grown very slowly as a percentage of total federal government expenditures.

Question 6

Figure 18-4 1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion. A) would be equal to B) would be greater than C) would be less than D) may be greater than or less than" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 18-4.In the graph above,the shift from AD1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Accepted Answer

A)  would be equal to
B)  would be greater than
C)  would be less than
D)  may be greater than or less than B

Question 7

In absolute value,the tax multiplier is greater than the government purchases multiplier.

Accepted Answer

A) True 
 B)False

Question 8

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Accepted Answer

A)  higher;higher
B)  higher;lower
C)  lower;higher
D)  lower;lower

Question 9

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Accepted Answer

A) True 
 B)False

Question 10

The use of fiscal policy to stabilize the economy is limited because

Accepted Answer

A)  changes in government spending and tax rates have a small effect on aggregate demand.
B)  changes in government spending and tax rates have a small effect on interest rates.
C)  the legislative process can be slow,which means that it is difficult to make fiscal policy actions in a timely way.
D)  the Internal Revenue Service (IRS) resists changes in tax rates because of all the changes they would have to make to the tax code.

Question 11

Table 18-1
 
-Refer to Table 18-1.Suppose the economy is in the state described by the table above.What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and aggregate supply diagram to illustrate the appropriate fiscal policy to use in this situation.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The economy begins in equilibrium at po...

Question 12

Expansionary fiscal policy

Accepted Answer

A)  can be effective in the short run.
B)  causes complete crowding out in the short run.
C)  is never effective because of crowding out.
D)  can be effective in the long run.

Question 13

Figure 18-1 
-Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Accepted Answer

A)  A to B.
B)  B to C.
C)  C to B.
D)  B to A.
E)  A to E.

Question 14

Which of the following provides health-care coverage to people age 65 and over?

Accepted Answer

A)  Medicaid
B)  Medicare
C)  Social Security
D)  Health-Aid

Question 15

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant. )

Accepted Answer

A)  a $300 billion decrease in GDP
B)  a $300 billion increase in GDP
C)  a $30 billion increase in GDP
D)  a $133.33 billion decrease in GDP
E)  a $133.33 billion increase in GDP A

Question 16

Figure 18-1 
-Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Accepted Answer

A)  E to B
B)  B to C
C)  A to B
D)  B to A
E)  C to D

Question 17

Which of the following would increase the size of the government purchases multiplier?

Accepted Answer

A)  an increase in the tax rate
B)  an increase in the quantity of imports purchased by households from an increase in income
C)  a decrease in the amount of consumption spending by households from an increase in income
D)  a decrease in the amount saved by households from an increase in income D

Question 18

Tax cuts on business income increase aggregate demand by increasing

Accepted Answer

A)  business investment spending.
B)  consumption spending.
C)  government spending.
D)  wage rates.

Question 19

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg...

Question 20

A decrease in which of the following would decrease the tax wedge?

Accepted Answer

A)  marginal tax rate
B)  money supply
C)  national debt
D)  federal budget deficit

Exam 18: Fiscal Policy

Which of the following best describes supply-side economics?

Correct Answer
verified

Congress and the president carry out fiscal policy through changes in

Correct Answer
verified

The largest source of federal government revenue in 2010 was

Correct Answer
verified

Correct Answer
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From the 1960s to 2010,transfer payments

Correct Answer
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Figure 18-4 -Refer to Figure 18-4.In the graph above,the shift from AD₁ to AD₂ represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Correct Answer
verified
B

In absolute value,the tax multiplier is greater than the government purchases multiplier.

Correct Answer
verified

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .

Correct Answer
verified

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Correct Answer
verified

The use of fiscal policy to stabilize the economy is limited because

Correct Answer
verified

Correct Answer
verified
The economy begins in equilibrium at po...
View Answer

Expansionary fiscal policy

Correct Answer
verified

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Correct Answer
verified

Which of the following provides health-care coverage to people age 65 and over?

Correct Answer
verified

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant. )

Correct Answer
verified
A

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Correct Answer
verified

Which of the following would increase the size of the government purchases multiplier?

Correct Answer
verified
D

Tax cuts on business income increase aggregate demand by increasing

Correct Answer
verified

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Correct Answer
verified
In the basic aggregate demand and aggreg...
View Answer

A decrease in which of the following would decrease the tax wedge?

Correct Answer
verified

Exam 18: Fiscal Policy

Which of the following best describes supply-side economics?

Correct AnswerverifiedShow Answer

Congress and the president carry out fiscal policy through changes in

Correct AnswerverifiedShow Answer

The largest source of federal government revenue in 2010 was

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

From the 1960s to 2010,transfer payments

Correct AnswerverifiedShow Answer

Figure 18-4 -Refer to Figure 18-4.In the graph above,the shift from AD1 to AD2 represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Correct AnswerverifiedB

In absolute value,the tax multiplier is greater than the government purchases multiplier.

Correct AnswerverifiedShow Answer

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Correct AnswerverifiedShow Answer

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

Correct AnswerverifiedShow Answer

The use of fiscal policy to stabilize the economy is limited because

Correct AnswerverifiedShow Answer

Correct Answerverified The economy begins in equilibrium at po...View AnswerShow Answer

Expansionary fiscal policy

Correct AnswerverifiedShow Answer

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Correct AnswerverifiedShow Answer

Which of the following provides health-care coverage to people age 65 and over?

Correct AnswerverifiedShow Answer

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant. )

Correct AnswerverifiedA

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Correct AnswerverifiedShow Answer

Which of the following would increase the size of the government purchases multiplier?

Correct AnswerverifiedD

Tax cuts on business income increase aggregate demand by increasing

Correct AnswerverifiedShow Answer

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Correct AnswerverifiedIn the basic aggregate demand and aggreg...View AnswerShow Answer

A decrease in which of the following would decrease the tax wedge?

Correct AnswerverifiedShow Answer

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Figure 18-4 -Refer to Figure 18-4.In the graph above,the shift from AD₁ to AD₂ represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Correct Answer
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B

Correct Answer
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Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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The economy begins in equilibrium at po...
View Answer

Correct Answer
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A

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D

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In the basic aggregate demand and aggreg...
View Answer

Correct Answer
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