Question 1

In a graph of the aggregate demand curve,a decrease in investment by businesses is represented by a:

Accepted Answer

A)   Leftward shift of the curve.
B)   Rightward shift of the curve.
C)   Movement up the curve.
D)   Movement down the curve.

Question 2

A budget deficit is incurred whenever:

Accepted Answer

A)   Tax revenues fall short of expenditures over the fiscal year.
B)   Discretionary fiscal spending is used to achieve macro equilibrium.
C)   The U.S.Treasury engages in refinancing activities.
D)   The government uses fiscal policy.

Question 3

An improvement in consumer confidence will cause:

Accepted Answer

A)   A movement down the aggregate demand curve.
B)   The aggregate supply curve to shift to the right.
C)   The aggregate demand curve to shift to the right.
D)   The aggregate demand curve to shift to the left.

Question 4

Which of the following economies has the largest multiplier?

Accepted Answer

A)   Economy A with an MPS of 0.5
B)   Economy B with an MPS of 0.1
C)   Economy C with an MPC of 0.8
D)   Economy D with an MPC of 0.6.

Question 5

Figure 12.1: 1,the economy depicted in Figure 12.1 confronts a real GDP gap of: A)  Zero. B)  $400 billion. C)  $800 billion. D)  $560 billion." class="answers-bank-image d-inline" rel="preload" >
-Assuming aggregate demand is represented by AD1,the economy depicted in Figure 12.1 confronts a real GDP gap of:

Accepted Answer

A)   Zero.
B)   $400 billion.
C)   $800 billion.
D)   $560 billion.

Question 6

Discuss why Aggregate demand falls when people buy more imports,ceteris paribus.

Accepted Answer

Expenditures on imports do not generate ...

Question 7

Fiscal stimulus is most effective in changing the level of real output without causing inflation when the aggregate supply curve is:

Accepted Answer

A)   Horizontal.
B)   Vertical.
C)   Upward sloping to the right.
D)   Downward sloping to the right.

Question 8

Fiscal stimulus includes all of the following except:

Accepted Answer

A)   Government spending for highways.
B)   Government purchase of military goods.
C)   An increase in saving.
D)   A tax cut.

Question 9

A budget deficit occurs if government spending:

Accepted Answer

A)   Equals tax revenues.
B)   Is greater than tax revenues.
C)   Is less than tax revenues.
D)   Causes tax revenues to increase.

Question 10

A tax cut is likely to cause:

Accepted Answer

A)   An increase in consumer spending.
B)   A decrease in saving.
C)   A decrease in aggregate demand.
D)   An increase in government spending.

Question 11

The Tax Equity and Fiscal Responsibility Act of 1982 increased taxes in an effort to reduce inflationary pressure.Which of the following indicates the appropriate change in the U.S.economy?

Accepted Answer

A)   Aggregate demand shifted to the left
B)   Aggregate demand shifted to the right
C)   The economy moved up along the aggregate demand curve
D)   The economy moved down along the aggregate demand curve

Question 12

Most of the countries in the world suffered long and deep losses of output and employment between 1930 and 1935,which in turn meant fewer purchases of U.S.goods and services.Which of the following indicates the appropriate change in the U.S.economy?

Accepted Answer

A)   Aggregate demand shifted to the left
B)   Aggregate demand shifted to the right
C)   The economy moved up along the aggregate demand curve
D)   The economy moved down along the aggregate demand curve

Question 13

Fiscal restraint will definitely occur if the government:

Accepted Answer

A)   Reduces its spending and reduces tax rates.
B)   Reduces its spending and increases tax rates.
C)   Increases its spending and reduces tax rates.
D)   Increases its spending and increases tax rates.

Question 14

Which of the following helps explain the multiplier effect?

Accepted Answer

A)   Income is spent and re-spent in the circular flow model.
B)   People buy a lot of luxury items.
C)   Incomes tend to increase with inflation.
D)   Banks only hold a fraction of their deposits on reserve.

Question 15

The GDP gap is:

Accepted Answer

A)   The difference between equilibrium output and full-employment output.
B)   The amount of output at the ideal price level.
C)   Equal to the difference between imports and exports.
D)   Equal to the multiplier.

Question 16

Which of the following is consistent with what Keynes believed?

Accepted Answer

A)   Markets automatically self-adjust to full employment very quickly
B)   The economy is inherently stable
C)   Monetary policy should be used to shift the aggregate supply curve
D)   Fiscal policy should be used to shift the aggregate demand curve

Question 17

If the federal government uses its budget to shift aggregate demand in an attempt to manage the macroeconomy,it is likely that the budget will:

Accepted Answer

A)   Always be balanced.
B)   Always be in a deficit.
C)   Always be in a surplus.
D)   Often be unbalanced.

Question 18

If the value of the dollar plummets in international currency markets,initially this causes foreigners to buy more American goods.Which of the following indicates the appropriate change in the U.S.economy?

Accepted Answer

A)   The economy moves up along the aggregate demand curve
B)   The economy moves down along the aggregate demand curve
C)   Aggregate demand shifts to the left
D)   Aggregate demand shifts to the right

Question 19

If the aggregate supply curve is upward sloping,an increase in aggregate demand will cause an increase in output and no change in prices.

Accepted Answer

A) True 
 B)False

Question 20

Inflation occurs when:

Accepted Answer

A)   Aggregate demand increases faster than unemployment.
B)   Unemployment increases faster than the labor force.
C)   Aggregate demand increases faster than output.
D)   Output increases faster than unemployment.

Exam 12: Fiscal Policy

If the federal government uses its budget to shift aggregate demand in an attempt to manage the macroeconomy,it is likely that the budget will:

Correct AnswerverifiedShow Answer

Which of the following economies has the largest multiplier?

Correct AnswerverifiedShow Answer

Figure 12.1: -Assuming aggregate demand is represented by AD1,the economy depicted in Figure 12.1 confronts a real GDP gap of:

Correct AnswerverifiedShow Answer

Which of the following is consistent with what Keynes believed?

Correct AnswerverifiedShow Answer

If the value of the dollar plummets in international currency markets,initially this causes foreigners to buy more American goods.Which of the following indicates the appropriate change in the U.S.economy?

Correct AnswerverifiedShow Answer

In a graph of the aggregate demand curve,a decrease in investment by businesses is represented by a:

Correct AnswerverifiedShow Answer

Discuss why Aggregate demand falls when people buy more imports,ceteris paribus.

Correct AnswerverifiedExpenditures on imports do not generate ...View AnswerShow Answer

Which of the following helps explain the multiplier effect?

Correct AnswerverifiedShow Answer

A budget deficit occurs if government spending:

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An improvement in consumer confidence will cause:

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Fiscal restraint will definitely occur if the government:

Correct AnswerverifiedShow Answer

Fiscal stimulus includes all of the following except:

Correct AnswerverifiedShow Answer

A tax cut is likely to cause:

Correct AnswerverifiedShow Answer

Most of the countries in the world suffered long and deep losses of output and employment between 1930 and 1935,which in turn meant fewer purchases of U.S.goods and services.Which of the following indicates the appropriate change in the U.S.economy?

Correct AnswerverifiedShow Answer

If the aggregate supply curve is upward sloping,an increase in aggregate demand will cause an increase in output and no change in prices.

Correct AnswerverifiedShow Answer

The GDP gap is:

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Inflation occurs when:

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A budget deficit is incurred whenever:

Correct AnswerverifiedShow Answer

The Tax Equity and Fiscal Responsibility Act of 1982 increased taxes in an effort to reduce inflationary pressure.Which of the following indicates the appropriate change in the U.S.economy?

Correct AnswerverifiedShow Answer

Fiscal stimulus is most effective in changing the level of real output without causing inflation when the aggregate supply curve is:

Correct AnswerverifiedShow Answer

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Figure 12.1: -Assuming aggregate demand is represented by AD₁,the economy depicted in Figure 12.1 confronts a real GDP gap of:

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Expenditures on imports do not generate ...
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