Question 1

When government spending is added to the basic macroeconomic model,the multiplier for G would

Accepted Answer

A)   be higher than the multiplier for autonomous spending.
B)   be lower than the multiplier for autonomous spending.
C)   be equal to the multiplier for autonomous spending.
D)   have no relationship to the autonomous spending multiplier.

Question 2

Which of the following statements would appeal to someone who favors an expanded public sector as the basis of expansionary fiscal policy?

Accepted Answer

A)   "The government isn't the solution; it's the problem."
B)   "The government that governs least governs best."
C)   "The American people want national defense; they want laws to be enforced; they want federal support for education and environmental protection,and they want transfer payments for the elderly and unemployed."
D)   "If you ever got anything good out of the government you can be sure that some rich so-and-so got more."

Question 3

Supply-side tax cuts are more likely to have the intended beneficial effect on

Accepted Answer

A)   budget deficits.
B)   consumer spending.
C)   investment spending.
D)   net exports.

Question 4

When we add a personal income tax to the macroeconomic model,the

Accepted Answer

A)   multiplier becomes larger.
B)   multiplier becomes smaller.
C)   expenditures schedule shifts upward.
D)   expenditures schedule becomes steeper.

Question 5

Which of the following is one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Accepted Answer

A)   transfer payments
B)   outsourcing
C)   multiplier
D)   personal income tax

Question 6

For liberals,the United States has a(n)

Accepted Answer

A)   public sector that is too large.
B)   private sector that is too small.
C)   economy that is too heavily regulated.
D)   public sector that is too small.

Question 7

Historically,the government has used fiscal policy to affect the economy through

Accepted Answer

A)   central planning.
B)   indicative planning.
C)   aggregate demand.
D)   aggregate supply.

Question 8

An automatic stabilizer is a feature of the economy that

Accepted Answer

A)   makes prices "sticky."
B)   reduces its sensitivity to shocks.
C)   maximizes its volatility.
D)   automatically reduces recessionary trends.

Question 9

What is the difference between tax cuts imposed on higher-income households compared with lower- and middle-income households? Discuss the implications for the multiplier and the effectiveness of the tax cuts for boosting GDP.

Accepted Answer

Higher-income households tend to save a ...

Question 10

If a "liberal" wanted to decrease aggregate demand,which of the following would she tend to favor?

Accepted Answer

A)   An increase in government spending,because it will increase the size of the public sector.
B)   A decrease in government spending,because it keeps the public sector small.
C)   An increase in transfer payments,because it has a larger multiplier than tax changes.
D)   An increase in taxes,because it makes the public sector larger.

Question 11

A Keynesian economist would expect a supply-side tax cut to shift

Accepted Answer

A)   only the aggregate supply curve outward.
B)   only the aggregate demand curve outward.
C)   both the aggregate demand and aggregate supply curves outward.
D)   the aggregate supply curve outward and the aggregate demand curve inward.

Question 12

For any given change in taxes,the multiplier

Accepted Answer

A)   will work indirectly through consumption.
B)   effect will occur in two steps.
C)   effect will be smaller than for an equivalent dollar change in government spending.
D)   All of the above are correct.

Question 13

If a state government reduces property taxes for residents at the same time that it increases the state income tax,what will happen to the expenditures schedule of the residents of this state?

Accepted Answer

A)   It shifts upward.
B)   It shifts downward.
C)   It becomes less steep.
D)   It becomes steeper.
E)   It does not change.

Question 14

When the economy has an income tax that is variable,the multiplier is

Accepted Answer

A)   unchanged.
B)   larger.
C)   smaller.
D)   unpredictable.

Question 15

Changes in government spending

Accepted Answer

A)   are an indirect component of the expenditures schedule.
B)   have a different multiplier effect than changes in business investment spending.
C)   are a direct component of the expenditures schedule and have the same multiplier effect as changes in business investment spending.
D)   do not have an effect on spending if they are matched by tax changes.

Question 16

The central idea of supply-side tax cuts is that certain types of tax cuts will increase

Accepted Answer

A)   aggregate demand.
B)   aggregate supply.
C)   the supply of imports.
D)   the supply of money.

Question 17

Appropriate fiscal policy in the U.S.in 2009 would attempt to

Accepted Answer

A)   increase taxes.
B)   decrease aggregate supply.
C)   increase aggregate demand.
D)   decrease aggregate demand.

Question 18

Reductions in the personal income tax,often advocated by supply-siders to increase labor supply and effort,can be expected to also

Accepted Answer

A)   decrease consumption spending.
B)   increase consumption spending.
C)   decrease investment spending.
D)   increase export sales.

Question 19

A fiscal policy that reduces taxes or increases government spending will cause a(n)

Accepted Answer

A)   increase in real GDP and a decrease in the price level.
B)   increase in real GDP and an increase in the price level.
C)   decrease in real GDP and a decrease in the price level.
D)   decrease in real GDP and an increase in the price level.

Question 20

Which of the following factors has the most quantitative importance on the oversimplified multiplier formula?

Accepted Answer

A)   ​it ignores variable imports
B)   ​it ignores price-level changes
C)   ​it ignores income taxes
D)   ​All of these equally affect the oversimplified multiplier formula

Exam 11: Managing Aggregate Demand Fiscal Policy

For any given change in taxes,the multiplier

Correct AnswerverifiedShow Answer

Which of the following factors has the most quantitative importance on the oversimplified multiplier formula?

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Which of the following statements would appeal to someone who favors an expanded public sector as the basis of expansionary fiscal policy?

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If a "liberal" wanted to decrease aggregate demand,which of the following would she tend to favor?

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Which of the following is one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Correct AnswerverifiedShow Answer

Historically,the government has used fiscal policy to affect the economy through

Correct AnswerverifiedShow Answer

For liberals,the United States has a(n)

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An automatic stabilizer is a feature of the economy that

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A Keynesian economist would expect a supply-side tax cut to shift

Correct AnswerverifiedShow Answer

The central idea of supply-side tax cuts is that certain types of tax cuts will increase

Correct AnswerverifiedShow Answer

Changes in government spending

Correct AnswerverifiedShow Answer

What is the difference between tax cuts imposed on higher-income households compared with lower- and middle-income households? Discuss the implications for the multiplier and the effectiveness of the tax cuts for boosting GDP.

Correct AnswerverifiedHigher-income households tend to save a ...View AnswerShow Answer

A fiscal policy that reduces taxes or increases government spending will cause a(n)

Correct AnswerverifiedShow Answer

Appropriate fiscal policy in the U.S.in 2009 would attempt to

Correct AnswerverifiedShow Answer

When government spending is added to the basic macroeconomic model,the multiplier for G would

Correct AnswerverifiedShow Answer

When the economy has an income tax that is variable,the multiplier is

Correct AnswerverifiedShow Answer

Reductions in the personal income tax,often advocated by supply-siders to increase labor supply and effort,can be expected to also

Correct AnswerverifiedShow Answer

If a state government reduces property taxes for residents at the same time that it increases the state income tax,what will happen to the expenditures schedule of the residents of this state?

Correct AnswerverifiedShow Answer

Supply-side tax cuts are more likely to have the intended beneficial effect on

Correct AnswerverifiedShow Answer

When we add a personal income tax to the macroeconomic model,the

Correct AnswerverifiedShow Answer

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Higher-income households tend to save a ...
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