Question 1

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

Accepted Answer

A)  increase aggregate demand.
B)  decrease aggregate demand.
C)  increase aggregate supply.
D)  decrease aggregate supply.E) None of the above
F) B) and C)

Question 2

If the government wishes to increase GDP by $1,200b,and the MPC is 0.75,it should:

Accepted Answer

A)  increase taxes by $300b.
B)  decrease taxes by $300b.
C)  increase taxes by $400b.
D)  decrease taxes by $400b.E) A) and C)
F) A) and D)

Question 3

If the fiscal policy makers aim to increase aggregate demand,they will likely enact:

Accepted Answer

A)  expansionary fiscal policy.
B)  contractionary fiscal policy.
C)  expansionary monetary policy.
D)  contractionary monetary policy.E) A) and C)
F) B) and D)

Question 4

If the government enacts contractionary fiscal policy,it:

Accepted Answer

A)  must want to slow economic activity.
B)  could increase taxes.
C)  expects aggregate demand to decrease.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 5

An example of fiscal policy would be government:

Accepted Answer

A)  increasing the amount of available educational grants.
B)  decreasing the income tax.
C)  increasing corporate income taxes.
D)  All of these are examples of fiscal policy.E) A) and B)
F) A) and C)

Question 6

The amount of time it takes for fiscal policy to have an impact on the economy creates:

Accepted Answer

A)  an information lag.
B)  a formulation lag.
C)  an implementation lag.
D)  a direction lag.E) A) and C)
F) A) and D)

Question 7

If the MPC is 0.9,and the government cuts taxes by $400b,the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $2,000b.
B)  an increase of $2,000b.
C)  a decrease of $3,600b.
D)  an increase of $3,600b.E) A) and B)
F) C) and D)

Question 8

If the government increased its spending by $200,and the GDP increased $1,000 as a result,the MPC must be:

Accepted Answer

A)  0.80.
B)  0.75.
C)  4.
D)  5.E) C) and D)
F) None of the above

Question 9

If the government wishes to decrease GDP by $2,000b,and the MPC is 0.6,it should:

Accepted Answer

A)  increase its spending by $1,200b.
B)  decrease its spending by $1,200b.
C)  increase its spending by $800b.
D)  decrease its spending by $800b.E) A) and B)
F) A) and D)

Question 10

If the government wished to shift aggregate demand to the left,it might:

Accepted Answer

A)  decrease military spending.
B)  increase the amount of educational grants available.
C)  decrease corporate income taxes.
D)  All of these would cause a decrease in aggregate demand.E) A) and B)
F) A) and C)

Question 11

Contractionary fiscal policy is enacted when the overall effect of decisions about taxation and spending is to:

Accepted Answer

A)  reduce aggregate demand.
B)  increase aggregate demand.
C)  reduce aggregate supply.
D)  increase aggregate supply.E) All of the above
F) B) and C)

Question 12

If the government wishes to decrease GDP by $2,100b,and the MPC is 0.6,it should:

Accepted Answer

A)  increase taxes by $1,400b.
B)  decrease taxes by $1,400b.
C)  increase taxes by $800b.
D)  decrease taxes by $800b.E) A) and B)
F) B) and D)

Question 13

The government-spending multiplier:

Accepted Answer

A)  is calculated as 1/(1 - MP
C)  .
B)  has a positive value.
C)  grows larger as the marginal propensity to consume increases.
D)  All of these are true.E) A) and D)
F) B) and C)

Question 14

If the government enacts contractionary fiscal policy,it could:

Accepted Answer

A)  reduce its spending.
B)  increase personal income taxes.
C)  increase corporate income taxes.
D)  All of these are contractionary.E) B) and C)
F) A) and D)

Question 15

If the government were to increase taxes,it would be enacting:

Accepted Answer

A)  contractionary fiscal policy.
B)  expansionary fiscal policy.
C)  a budgetary crisis intervention.
D)  expansionary budgetary policy.E) C) and D)
F) All of the above

Question 16

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Accepted Answer

A)  holds,and people increase their spending.
B)  holds,and people save more.
C)  fails to hold,and people increase their spending.
D)  fails to hold,and people save more.E) A) and B)
F) B) and C)

Question 17

Democrats often argue in favor of what to push the economy toward economic recovery,as they did during the recession that began in 2008?

Accepted Answer

A)  Tax cuts
B)  Increase government spending
C)  Decrease government spending
D)  Encourage the public to save moreE) A) and B)
F) B) and D)

Question 18

If the marginal propensity to consume is 0.8,the taxation multiplier must be:

Accepted Answer

A)  5.
B)  -2.
C)  4.
D)  -4.E) All of the above
F) A) and B)

Question 19

According to this book,The American Recovery and Reinvestment Act of 2009:

Accepted Answer

A)  was successful.
B)  was unsuccessful.
C)  remains hotly debated whether it was successful or not.
D)  is known as the most effective legislation ever passed in U.S.history.E) A) and D)
F) None of the above

Question 20

If the government cut taxes by $200,and the GDP increased $1,800 as a result,the MPC must be:

Accepted Answer

A)  0.90.
B)  0.95.
C)  9.
D)  5.E) B) and C)
F) C) and D)

Exam 29: Fiscal Policy

According to this book,The American Recovery and Reinvestment Act of 2009:

Correct AnswerverifiedShow Answer

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

Correct AnswerverifiedShow Answer

If the government enacts contractionary fiscal policy,it:

Correct AnswerverifiedShow Answer

Contractionary fiscal policy is enacted when the overall effect of decisions about taxation and spending is to:

Correct AnswerverifiedShow Answer

If the government cut taxes by $200,and the GDP increased $1,800 as a result,the MPC must be:

Correct AnswerverifiedShow Answer

If the government were to increase taxes,it would be enacting:

Correct AnswerverifiedShow Answer

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Correct AnswerverifiedShow Answer

If the government wishes to increase GDP by $1,200b,and the MPC is 0.75,it should:

Correct AnswerverifiedShow Answer

If the government wished to shift aggregate demand to the left,it might:

Correct AnswerverifiedShow Answer

If the government wishes to decrease GDP by $2,000b,and the MPC is 0.6,it should:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.8,the taxation multiplier must be:

Correct AnswerverifiedShow Answer

If the government increased its spending by $200,and the GDP increased $1,000 as a result,the MPC must be:

Correct AnswerverifiedShow Answer

Democrats often argue in favor of what to push the economy toward economic recovery,as they did during the recession that began in 2008?

Correct AnswerverifiedShow Answer

An example of fiscal policy would be government:

Correct AnswerverifiedShow Answer

The government-spending multiplier:

Correct AnswerverifiedShow Answer

If the MPC is 0.9,and the government cuts taxes by $400b,the overall effect on GDP will be:

Correct AnswerverifiedShow Answer

If the government enacts contractionary fiscal policy,it could:

Correct AnswerverifiedShow Answer

If the fiscal policy makers aim to increase aggregate demand,they will likely enact:

Correct AnswerverifiedShow Answer

The amount of time it takes for fiscal policy to have an impact on the economy creates:

Correct AnswerverifiedShow Answer

If the government wishes to decrease GDP by $2,100b,and the MPC is 0.6,it should:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified