Question 1

If the MPS is 0.1, the tax multiplier is

Accepted Answer

A)   10.
B)   -5.
C)   -9.
D)   -10.E) None of the above
F) C) and D)

Question 2

If planned injections are less than leakages, output will

Accepted Answer

A)   decrease.
B)   increase.
C)   remain constant.
D)   either increase or decrease.E) A) and B)
F) A) and C)

Question 3

If taxes depend on income and the MPC is 0.6 and t is 0.3, the tax multiplier is

Accepted Answer

A)   -1.03.
B)   -1.72.
C)   -2.0.
D)   -2.24.E) A) and C)
F) C) and D)

Question 4

Refer to the information provided in Figure 24.4 below to answer the question(s)  that follow. 2 and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion. A)  100 B)  200 C)  400 D)  800" class="answers-bank-image d-inline" rel="preload" > Figure 24.4
-Refer to Figure 24.4. If aggregate expenditures are represented by AE2 and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Accepted Answer

A)   100
B)   200
C)   400
D)   800E) All of the above
F) A) and C)

Question 5

An example of an automatic stabilizer is

Accepted Answer

A)   the food stamp program.
B)   changing the tax laws to increase the marginal tax rates.
C)   the indexation of social security benefits to the consumer price index.
D)   the interest the government pays on loans.E) All of the above
F) A) and D)

Question 6

When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.

Accepted Answer

A) True 
 B)False

Question 7

During a recession, unemployment ________, tax revenue ________, and the budget deficit ________.

Accepted Answer

A)   rises; falls; rises
B)   rises; rises; falls
C)   falls; rises; rises
D)   falls; falls; risesE) None of the above
F) B) and C)

Question 8

The tax multiplier is

Accepted Answer

A)   the ratio of the change in taxes to the change in the equilibrium level of output.
B)   the MPC multiplied by the MPS.
C)   the difference in taxes multiplied by the change in the equilibrium level of output.
D)   the ratio of the change in the equilibrium level of output to the change in taxes.E) A) and C)
F) A) and D)

Question 9

You are hired by the Bureau of Economic Analogies (BEA)  as an economic consultant. The Chairperson of the BEA tells you that he believes the current unemployment rate is too low. The unemployment rate can be increased if aggregate output decreases. He wants to know what policy to pursue to decrease aggregate output by $50 billion. The best estimate he has for the MPC is 0.9. Which of the following policies should you recommend?

Accepted Answer

A)   decrease government spending by $5 billion
B)   decrease government spending by $50 billion
C)   increase taxes by $5 billion
D)   cut taxes by $10 billion and to increase government spending by $5 billionE) None of the above
F) A) and D)

Question 10

You are hired by the Bureau of Economic Analogies (BEA)  as an economic consultant. The chairperson of the BEA tells you that he believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. He wants to know what policy to pursue to increase aggregate output by $500 billion. The best estimate he has for the MPC is 0.7. Which of the following policies should you recommend?

Accepted Answer

A)   Decrease government spending by $75 billion.
B)   Reduce taxes by $214.3 billion.
C)   Reduce taxes by $314.3 billion and to decrease government spending by $500 billion.
D)   Reduce the budget deficit by $300 billion.E) B) and C)
F) A) and B)

Question 11

Refer to the information provided in Table 24.4 below to answer the question(s)  that follow.
Table 24.4 
-Refer to Equation 24.4. At equilibrium, leakages in Peru equal

Accepted Answer

A)   2,040.
B)   1,560.
C)   1,440.
D)   960.E) None of the above
F) B) and C)

Question 12

The formula for the tax multiplier is

Accepted Answer

A)   -(MPS/MP
C)  .
B)   MPS/MPC.
C)   -(MPC/MPS) .
D)   -1/MPS.E) A) and D)
F) B) and C)

Question 13

Refer to the information provided in Table 24.4 below to answer the question(s)  that follow.
Table 24.4 
-Refer to Table 24.4. At an output level of $1,500, disposable income is

Accepted Answer

A)   $300.
B)   $600.
C)   $900.
D)   $1,200.E) B) and D)
F) A) and B)

Question 14

Refer to the information provided in Table 24.8 below to answer the question(s)  that follow.
Table 24.8
All Figures in Billions of Dollars
 
-Refer to Table 24.8. The equilibrium level of income is

Accepted Answer

A)   $2,000 billion.
B)   $3,400 billion.
C)   $3,600 billion.
D)   $3,800 billion.E) A) and B)
F) A) and C)

Question 15

Personal taxes are the ________ in the government's budget.

Accepted Answer

A)   smallest expenditure source
B)   largest expenditure source
C)   smallest revenue source
D)   largest revenue sourceE) A) and C)
F) C) and D)

Question 16

The tax multiplier is a negative multiplier.

Accepted Answer

A) True 
 B)False

Question 17

If the MPC is 0.8, the tax multiplier is

Accepted Answer

A)   -8.
B)   -5.
C)   -4.
D)   -1.2.E) A) and B)
F) A) and C)

Question 18

If the tax multiplier is -4 and taxes are reduced by $35 billion, output

Accepted Answer

A)   falls by $8.75 billion.
B)   falls by $140 billion.
C)   increases by $140 billion.
D)   increases by $8.75 billion.E) All of the above
F) B) and C)

Question 19

Refer to the information provided in Table 24.4 below to answer the question(s)  that follow.
Table 24.4 
-Refer to Table 24.4. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.

Accepted Answer

A)   $1,300
B)   $1,400
C)   $1,500
D)   $1,600E) All of the above
F) B) and C)

Question 20

Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Accepted Answer

A)   $100 billion.
B)   $200 billion.
C)   $300 billion.
D)   $400 billion.E) A) and B)
F) None of the above

Exam 24: The Government and Fiscal Policy

Refer to the information provided in Figure 24.4 below to answer the question(s) that follow. Figure 24.4 -Refer to Figure 24.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Correct Answer
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Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Table 24.4. At an output level of $1,500, disposable income is

Correct Answer
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When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.

Correct Answer
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Personal taxes are the ________ in the government's budget.

Correct Answer
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During a recession, unemployment , tax revenue , and the budget deficit .

Correct Answer
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Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Table 24.4. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.

Correct Answer
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The formula for the tax multiplier is

Correct Answer
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Refer to the information provided in Table 24.8 below to answer the question(s) that follow. Table 24.8 All Figures in Billions of Dollars -Refer to Table 24.8. The equilibrium level of income is

Correct Answer
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If the MPS is 0.1, the tax multiplier is

Correct Answer
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The tax multiplier is a negative multiplier.

Correct Answer
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The tax multiplier is

Correct Answer
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Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Correct Answer
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Correct Answer
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If the tax multiplier is -4 and taxes are reduced by $35 billion, output

Correct Answer
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If the MPC is 0.8, the tax multiplier is

Correct Answer
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Correct Answer
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If planned injections are less than leakages, output will

Correct Answer
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An example of an automatic stabilizer is

Correct Answer
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If taxes depend on income and the MPC is 0.6 and t is 0.3, the tax multiplier is

Correct Answer
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Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Equation 24.4. At equilibrium, leakages in Peru equal

Correct Answer
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Exam 24: The Government and Fiscal Policy

Refer to the information provided in Figure 24.4 below to answer the question(s) that follow. Figure 24.4 -Refer to Figure 24.4. If aggregate expenditures are represented by AE2 and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Table 24.4. At an output level of $1,500, disposable income is

Correct AnswerverifiedShow Answer

When the MPC is 0.8 and t is 0.4, then the government spending multiplier is about -1.54.

Correct AnswerverifiedShow Answer

Personal taxes are the ________ in the government's budget.

Correct AnswerverifiedShow Answer

During a recession, unemployment ________, tax revenue ________, and the budget deficit ________.

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Table 24.4. At an output level of $1,500 billion, the level of aggregate expenditure is ________ billion.

Correct AnswerverifiedShow Answer

The formula for the tax multiplier is

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 24.8 below to answer the question(s) that follow. Table 24.8 All Figures in Billions of Dollars -Refer to Table 24.8. The equilibrium level of income is

Correct AnswerverifiedShow Answer

If the MPS is 0.1, the tax multiplier is

Correct AnswerverifiedShow Answer

The tax multiplier is a negative multiplier.

Correct AnswerverifiedShow Answer

The tax multiplier is

Correct AnswerverifiedShow Answer

Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the tax multiplier is -4 and taxes are reduced by $35 billion, output

Correct AnswerverifiedShow Answer

If the MPC is 0.8, the tax multiplier is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If planned injections are less than leakages, output will

Correct AnswerverifiedShow Answer

An example of an automatic stabilizer is

Correct AnswerverifiedShow Answer

If taxes depend on income and the MPC is 0.6 and t is 0.3, the tax multiplier is

Correct AnswerverifiedShow Answer

Refer to the information provided in Table 24.4 below to answer the question(s) that follow. Table 24.4 -Refer to Equation 24.4. At equilibrium, leakages in Peru equal

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 24.4 below to answer the question(s) that follow. Figure 24.4 -Refer to Figure 24.4. If aggregate expenditures are represented by AE₂ and government spending increases by $20 billion, equilibrium aggregate output increases by $________ billion.

Correct Answer
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During a recession, unemployment , tax revenue , and the budget deficit .

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