Question 1

During which of the following situations would the government most likely have an expansionary fiscal policy?

Accepted Answer

A)   when current output is above full-employment output
B)   when the economy is expanding at a rapid pace
C)   when inflation is at 10 percent per year
D)   when the current unemployment rate is below the natural rate of unemployment
E)   when the current unemployment rate is above the natural rate of unemployment E

Question 2

Supply-side fiscal policy involves the use of

Accepted Answer

A)   government spending and taxes to affect the consumption side of the economy.
B)   government spending and taxes to affect the production side of the economy.
C)   government spending and taxes to affect the net exports side of the economy.
D)   monetary policy to supplement traditional fiscal policy.
E)   government spending and taxes to affect the aggregate demand curve.

Question 3

If the marginal propensity to consume MPC) equals 0.75 and the government increases spending by
$200 billion, what is the total impact on spending?

Accepted Answer

The total impact on spending would be $8...

Question 4

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Accepted Answer

A)   contractionary fiscal
B)   expansionary monetary
C)   contractionary monetary
D)   expansionary fiscal
E)   countercyclical monetary

Question 5

The spending multiplier is

Accepted Answer

A)   a formula to determine the total impact on savings from an initial change of a given amount.
B)   a formula to determine the total impact on consumption from an initial change of a given amount.
C)   only used when government spending increases.
D)   a formula to determine the total impact on spending from an initial change of a given amount.
E)   only used when government spending decreases.

Question 6

Monetary policy is conducted by the Federal Reserve. Fiscal policy is

Accepted Answer

A)   also conducted by the Federal Reserve.
B)   conducted by Congress and the president.
C)   conducted by the Supreme Court.
D)   conducted by the Department of Defense.
E)   conducted only at the state level.

Question 7

If people decide to save a greater percentage of their incomes, then the value of the spending multiplier will ________ and changes in government spending will have ________ impact on gross domestic product (GDP) .

Accepted Answer

A)   decrease; a larger
B)   decrease; a smaller
C)   increase; a larger
D)   increase; a larger.
E)   not change; the same

Question 8

Countercyclical fiscal policy involves changing government spending in order to shift the ________
curve, while supply-side fiscal policy involves changing government spending in order to shift the ________ curve.

Accepted Answer

A)   aggregate demand A
D)  ; short-run aggregate supply SRAS) 
B)   long-run aggregate supply LRAS) ; aggregate demand A
D)  
C)   aggregate demand A
D)   ; aggregate demand A
D)  
D)   aggregate demand A
D)  ; long-run aggregate supply LRAS) 
E)   long-run aggregate supply LRAS) ; long-run aggregate supply LRAS)

Question 9

Supply-side fiscal policy

Accepted Answer

A)   has been proven not to work.
B)   takes time to affect aggregate supply.
C)   has immediate effects on aggregate supply.
D)   includes increases in government employees' pay and individual tax breaks.
E)   is emphasized as a short-run solution to growth problems.

Question 10

At ________ tax rates, ________ in those tax rates lead to ________ in total tax revenue.

Accepted Answer

A)   low; increases; increases
B)   low; increases; decreases
C)   low; decreases; increases
D)   high; increases; increases
E)   high; decreases; decreases

Question 11

Where marginal propensity to consume is denoted as MPC, consider the following:
  
a. Assuming no crowding-out and MPC = 0.75, calculate the amount of government spending needed to bring this economy back to full-employment output.
b. Assuming no crowding-out and that $10 billion would be needed to bring this economy back to full-employment output, calculate the MPC in this economy.

Accepted Answer

a. When the MPC = 0.75, the spending mul...

Question 12

When aggregate demand is low enough to drive unemployment above the natural rate,

Accepted Answer

A)   there is downward pressure on the price level, and the government may want to conduct contractionary fiscal policy.
B)   the economy is entering into an expansion, and the government may want to conduct contractionary fiscal policy.
C)   there is upward pressure on the price level, and the government may want to conduct contractionary fiscal policy.
D)   there is upward pressure on the price level, and the government may want to conduct expansionary fiscal policy.
E)   there is downward pressure on the price level, and the government may want to conduct expansionary fiscal policy.

Question 13

If the spending multiplier is 5, what is the marginal propensity to consume in the economy?

Accepted Answer

A)   0.4
B)   -0.8
C)   0.5
D)   0.75
E)   0.8

Question 14

Crowding-out occurs when

Accepted Answer

A)   supply-side fiscal policy does not increase total output.
B)   consumption increases when government spending increases.
C)   private spending falls in response to increases in government spending.
D)   time lags crowd out the effects of fiscal policy.
E)   increases in government spending and decreases in taxes are offset by increases in savings. C

Question 15

If the unemployment rate falls below the natural rate of unemployment u*) ,

Accepted Answer

A)   the government will want to conduct expansionary fiscal policy.
B)   the Federal Reserve will want to conduct expansionary monetary policy.
C)   the economy is in a recession.
D)   there will be no worries about inflation.
E)   the government will want to conduct contractionary fiscal policy. E

Question 16

Complete crowding-out is when every dollar of

Accepted Answer

A)   government spending crowds out one dollar of tax revenue.
B)   government spending crowds out one dollar of private spending.
C)   private spending crowds out one dollar of government spending.
D)   private spending crowds out one dollar of tax revenue.
E)   tax revenue crowds out one dollar of government spending.

Question 17

When the economy falters, people often look to the government to help push the economy forward again. In fact, the government uses many different tools to try to affect the economy. Economists classify these tools on the basis of ________ policy and ________ policy.

Accepted Answer

A)   tax; spending
B)   monetary; fiscal
C)   expansionary; countercyclical
D)   tax; fiscal
E)   monetary; spending

Question 18

Refer to the following figure to answer the next questions.
 
-According to the figure, the amount of private savings after government borrowing is

Accepted Answer

A)   $50 billion.
B)   $25 billion.
C)   $100 billion.
D)   $150 billion.
E)   $275 billion.

Question 19

The three time lags that accompany policy decisions are

Accepted Answer

A)   recognition lag, implementation lag, and impact lag.
B)   crowding-out lag, implementation lag, and impact lag.
C)   recognition lag, implementation lag, and countercyclical lag.
D)   crowding-out lag, implementation lag, and countercyclical lag.
E)   crowding-out lag, stabilizing lag, and countercyclical lag.

Question 20

If an initial increase in government spending of $100 billion leads to a total increase of $400 billion in income, the marginal propensity to consume in the economy is

Accepted Answer

A)   0.4.
B)   -0.8.
C)   0.5.
D)   0.75.
E)   0.8.

Exam 16: Fiscal Policy

During which of the following situations would the government most likely have an expansionary fiscal policy?

Correct Answer
verified
E

Supply-side fiscal policy involves the use of

Correct Answer
verified

If the marginal propensity to consume MPC) equals 0.75 and the government increases spending by $200 billion, what is the total impact on spending?

Correct Answer
verified
The total impact on spending would be $8...
View Answer

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Correct Answer
verified

The spending multiplier is

Correct Answer
verified

Monetary policy is conducted by the Federal Reserve. Fiscal policy is

Correct Answer
verified

If people decide to save a greater percentage of their incomes, then the value of the spending multiplier will and changes in government spending will have impact on gross domestic product (GDP) .

Correct Answer
verified

Countercyclical fiscal policy involves changing government spending in order to shift the curve, while supply-side fiscal policy involves changing government spending in order to shift the curve.

Correct Answer
verified

Supply-side fiscal policy

Correct Answer
verified

At tax rates, in those tax rates lead to in total tax revenue.

Correct Answer
verified

Correct Answer
verified
a. When the MPC = 0.75, the spending mul...
View Answer

When aggregate demand is low enough to drive unemployment above the natural rate,

Correct Answer
verified

If the spending multiplier is 5, what is the marginal propensity to consume in the economy?

Correct Answer
verified

Crowding-out occurs when

Correct Answer
verified
C

If the unemployment rate falls below the natural rate of unemployment u*) ,

Correct Answer
verified
E

Complete crowding-out is when every dollar of

Correct Answer
verified

When the economy falters, people often look to the government to help push the economy forward again. In fact, the government uses many different tools to try to affect the economy. Economists classify these tools on the basis of policy and policy.

Correct Answer
verified

Refer to the following figure to answer the next questions. -According to the figure, the amount of private savings after government borrowing is

Correct Answer
verified

The three time lags that accompany policy decisions are

Correct Answer
verified

If an initial increase in government spending of $100 billion leads to a total increase of $400 billion in income, the marginal propensity to consume in the economy is

Correct Answer
verified

Exam 16: Fiscal Policy

During which of the following situations would the government most likely have an expansionary fiscal policy?

Correct AnswerverifiedE

Supply-side fiscal policy involves the use of

Correct AnswerverifiedShow Answer

If the marginal propensity to consume MPC) equals 0.75 and the government increases spending by $200 billion, what is the total impact on spending?

Correct AnswerverifiedThe total impact on spending would be $8...View AnswerShow Answer

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Correct AnswerverifiedShow Answer

The spending multiplier is

Correct AnswerverifiedShow Answer

Monetary policy is conducted by the Federal Reserve. Fiscal policy is

Correct AnswerverifiedShow Answer

If people decide to save a greater percentage of their incomes, then the value of the spending multiplier will ________ and changes in government spending will have ________ impact on gross domestic product (GDP) .

Correct AnswerverifiedShow Answer

Countercyclical fiscal policy involves changing government spending in order to shift the ________ curve, while supply-side fiscal policy involves changing government spending in order to shift the ________ curve.

Correct AnswerverifiedShow Answer

Supply-side fiscal policy

Correct AnswerverifiedShow Answer

At ________ tax rates, ________ in those tax rates lead to ________ in total tax revenue.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. When the MPC = 0.75, the spending mul...View AnswerShow Answer

When aggregate demand is low enough to drive unemployment above the natural rate,

Correct AnswerverifiedShow Answer

If the spending multiplier is 5, what is the marginal propensity to consume in the economy?

Correct AnswerverifiedShow Answer

Crowding-out occurs when

Correct AnswerverifiedC

If the unemployment rate falls below the natural rate of unemployment u*) ,

Correct AnswerverifiedE

Complete crowding-out is when every dollar of

Correct AnswerverifiedShow Answer

When the economy falters, people often look to the government to help push the economy forward again. In fact, the government uses many different tools to try to affect the economy. Economists classify these tools on the basis of ________ policy and ________ policy.

Correct AnswerverifiedShow Answer

Refer to the following figure to answer the next questions. -According to the figure, the amount of private savings after government borrowing is

Correct AnswerverifiedShow Answer

The three time lags that accompany policy decisions are

Correct AnswerverifiedShow Answer

If an initial increase in government spending of $100 billion leads to a total increase of $400 billion in income, the marginal propensity to consume in the economy is

Correct AnswerverifiedShow Answer

Correct Answer
verified
E

Correct Answer
verified

Correct Answer
verified
The total impact on spending would be $8...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If people decide to save a greater percentage of their incomes, then the value of the spending multiplier will and changes in government spending will have impact on gross domestic product (GDP) .

Correct Answer
verified

Countercyclical fiscal policy involves changing government spending in order to shift the curve, while supply-side fiscal policy involves changing government spending in order to shift the curve.

Correct Answer
verified

Correct Answer
verified

At tax rates, in those tax rates lead to in total tax revenue.

Correct Answer
verified

Correct Answer
verified
a. When the MPC = 0.75, the spending mul...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
E

Correct Answer
verified

When the economy falters, people often look to the government to help push the economy forward again. In fact, the government uses many different tools to try to affect the economy. Economists classify these tools on the basis of policy and policy.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified