Question 1

Supply-side fiscal policies were advocated by the Reagan administration.

Accepted Answer

A) True 
 B)False

Question 2

Supply-side economists:

Accepted Answer

A)   saw influence beyond in both the Bush and Clinton administrations.
B)   disagreed with economist Arthur Laffer's views on taxes.
C)   were influential in President Reagan's decision to change the tax structure.
D)   believe that government regulations do not reduce productivity and undermine industrial efficiency.E) A) and B)
F) None of the above

Question 3

Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.80, an increase in federal government spending of $100 billion at below full employment would be expected to shift the aggregate demand curve by $500 billion to the right.

Accepted Answer

A) True 
 B)False

Question 4

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Accepted Answer

A)   supply-side economics.
B)   Keynesian economics.
C)   monetarist economics.
D)   Marxian economics.E) A) and C)
F) All of the above

Question 5

Appropriate supply-side policy (or policies)  during a recession would be to do which of the following?

Accepted Answer

A)   Cut taxes on business.
B)   Reduce costly regulations on businesses.
C)   Increase government spending.
D)   Both a. and b. above are correct.E) All of the above
F) None of the above

Question 6

When the MPC gets smaller, the spending multiplier:

Accepted Answer

A)   gets larger.
B)   gets smaller.
C)   stays the same.
D)   gets smaller at low real GDP, and larger at high real GDP.
E)   gets larger at low real GDP, and smaller at high real GDP.F) B) and C)
G) A) and D)

Question 7

The government wishes to close an inflationary gap by reducing real GDP by $400 billion. Assuming a tax multiplier of 4 and an income multiplier of 5, which of the following policy prescriptions would reduce the inflationary gap by $400 billion?

Accepted Answer

A)   Decreasing government spending by $400 billion and increasing taxes by $400 billion.
B)   Decreasing government spending by $160 billion and decreasing taxes by $100 billion.
C)   Decreasing government spending by $40 billion and decreasing taxes by $40 billion.
D)   Decreasing government spending by $80 billion and keeping taxes the same.
E)   Doing absolutely nothing to the economy.F) B) and D)
G) All of the above

Question 8

It is inflationary for government to increase spending if:

Accepted Answer

A)   it also cuts taxes.
B)   the aggregate supply curve is flat.
C)   the economy is at full employment.
D)   equilibrium real GDP is well below full employment.E) A) and C)
F) A) and D)

Question 9

Exhibit 15-2  Aggregate demand and supply model 1 and the marginal propensity to consume (MPC)  is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E2 by: A)  decreasing government spending by $750 billion. B)  decreasing government spending by $100 billion. C)  increasing government spending by $25 billion. D)  decreasing government spending by $25 billion. E)  None of the above." class="answers-bank-image d-inline" rel="preload" > Suppose the economy in Exhibit 15-2 is in equilibrium at point E1 and the marginal propensity to consume (MPC)  is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E2 by:

Accepted Answer

A)   decreasing government spending by $750 billion.
B)   decreasing government spending by $100 billion.
C)   increasing government spending by $25 billion.
D)   decreasing government spending by $25 billion.
E)   None of the above.F) None of the above
G) A) and B)

Question 10

The change in consumption divided by a change in income is defined as:

Accepted Answer

A)   the marginal propensity to consume.
B)   autonomous consumption.
C)   the consumption function.
D)   Keynes' absolute income hypothesis.
E)   transitory consumption.F) A) and B)
G) C) and D)

Question 11

An increase in the marginal propensity to consume (MPC) leads to a increase in the spending multiplier.

Accepted Answer

A) True 
 B)False

Question 12

A government spending and taxation policy to achieve macroeconomic goals is known as:

Accepted Answer

A)   countercyclical policy.
B)   fiscal policy.
C)   monetary policy.
D)   a balanced budget.E) A) and B)
F) B) and D)

Question 13

A tax multiplier equal to − 4.30 would imply that a $100 tax increase would lead to a:

Accepted Answer

A)   $430 decline in real GDP.
B)   $430 increase in real GDP.
C)   4.3 percent increase in real GDP.
D)   4.3 percent decrease in real GDP.
E)   43 percent decrease in real GDP.F) A) and B)
G) C) and E)

Question 14

The marginal propensity to consume is:

Accepted Answer

A)   the change in income divided by the change in consumption.
B)   consumption spending divided by income.
C)   income divided by consumption spending.
D)   the change in consumption divided by the change in income.
E)   the change in consumption divided by income.F) B) and E)
G) A) and D)

Question 15

If your income increases from $40,000 to $48,000 and your consumption increases from $35,000 to $39,000, your marginal propensity to consume (MPC)  is:

Accepted Answer

A)   0.20.
B)   0.40.
C)   0.50.
D)   0.80.
E)   1.00.F) B) and D)
G) All of the above

Question 16

If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:

Accepted Answer

A)   a reduction in taxes coupled with a reduction in government expenditures of equal size.
B)   an increase in government expenditures coupled with an increase in taxes of equal size.
C)   a reduction in taxes, without any offsetting reduction in government expenditures.
D)   maintenance of a balanced budget.E) B) and C)
F) C) and D)

Question 17

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC)  is 0.75, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending) . If an increase of $1,000 billion aggregate demand can restore full employment, the government should:

Accepted Answer

A)   increase spending by $250 billion.
B)   decrease spending by $750 billion.
C)   increase spending by $1,000 billion.
D)   increase spending by $750 billion.E) A) and B)
F) A) and C)

Question 18

If the MPC = .75, the spending multiplier is:

Accepted Answer

A)   4.
B)   5.
C)   1.33.
D)   1.20.
E)   .25.F) A) and B)
G) A) and C)

Question 19

Exhibit 15-7  Aggregate demand and supply model 1 and the marginal propensity to consume ( MPC )  is 0.75. Following Keynesian economics, to lower the price level from 170 to 150 the government should raise taxes by: A)  $20 billion. B)  $100 billion. C)  $133 billion. D)  $400 billion." class="answers-bank-image d-inline" rel="preload" > Suppose the economy in Exhibit 15-7 is in equilibrium at point E1 and the marginal propensity to consume ( MPC )  is 0.75. Following Keynesian economics, to lower the price level from 170 to 150 the government should raise taxes by:

Accepted Answer

A)   $20 billion.
B)   $100 billion.
C)   $133 billion.
D)   $400 billion.E) C) and D)
F) None of the above

Question 20

An advocate of supply-side fiscal policy would advocate which of the following?

Accepted Answer

A)   Subsidies to produce technological advances.
B)   Reduction in regulation.
C)   Reduction in resource prices.
D)   Reduction in taxes.
E)   All of the above.F) D) and E)
G) A) and E)

Exam 15: Fiscal Policy

It is inflationary for government to increase spending if:

Correct Answer
verified

The change in consumption divided by a change in income is defined as:

Correct Answer
verified

When the MPC gets smaller, the spending multiplier:

Correct Answer
verified

Supply-side fiscal policies were advocated by the Reagan administration.

Correct Answer
verified

An increase in the marginal propensity to consume (MPC) leads to a increase in the spending multiplier.

Correct Answer
verified

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Correct Answer
verified

Exhibit 15-7 Aggregate demand and supply model Suppose the economy in Exhibit 15-7 is in equilibrium at point E₁ and the marginal propensity to consume ( MPC ) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150 the government should raise taxes by:

Correct Answer
verified

Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.80, an increase in federal government spending of $100 billion at below full employment would be expected to shift the aggregate demand curve by $500 billion to the right.

Correct Answer
verified

If the MPC = .75, the spending multiplier is:

Correct Answer
verified

Supply-side economists:

Correct Answer
verified

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Correct Answer
verified

Exhibit 15-2 Aggregate demand and supply model Suppose the economy in Exhibit 15-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by:

Correct Answer
verified

Correct Answer
verified

An advocate of supply-side fiscal policy would advocate which of the following?

Correct Answer
verified

If your income increases from $40,000 to $48,000 and your consumption increases from $35,000 to $39,000, your marginal propensity to consume (MPC) is:

Correct Answer
verified

The marginal propensity to consume is:

Correct Answer
verified

The government wishes to close an inflationary gap by reducing real GDP by $400 billion. Assuming a tax multiplier of 4 and an income multiplier of 5, which of the following policy prescriptions would reduce the inflationary gap by $400 billion?

Correct Answer
verified

A government spending and taxation policy to achieve macroeconomic goals is known as:

Correct Answer
verified

If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:

Correct Answer
verified

A tax multiplier equal to − 4.30 would imply that a $100 tax increase would lead to a:

Correct Answer
verified

Exam 15: Fiscal Policy

It is inflationary for government to increase spending if:

Correct AnswerverifiedShow Answer

The change in consumption divided by a change in income is defined as:

Correct AnswerverifiedShow Answer

When the MPC gets smaller, the spending multiplier:

Correct AnswerverifiedShow Answer

Supply-side fiscal policies were advocated by the Reagan administration.

Correct AnswerverifiedShow Answer

An increase in the marginal propensity to consume (MPC) leads to a increase in the spending multiplier.

Correct AnswerverifiedShow Answer

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Correct AnswerverifiedShow Answer

Exhibit 15-7 Aggregate demand and supply model Suppose the economy in Exhibit 15-7 is in equilibrium at point E1 and the marginal propensity to consume ( MPC ) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150 the government should raise taxes by:

Correct AnswerverifiedShow Answer

Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.80, an increase in federal government spending of $100 billion at below full employment would be expected to shift the aggregate demand curve by $500 billion to the right.

Correct AnswerverifiedShow Answer

If the MPC = .75, the spending multiplier is:

Correct AnswerverifiedShow Answer

Supply-side economists:

Correct AnswerverifiedShow Answer

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Correct AnswerverifiedShow Answer

Exhibit 15-2 Aggregate demand and supply model Suppose the economy in Exhibit 15-2 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E2 by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An advocate of supply-side fiscal policy would advocate which of the following?

Correct AnswerverifiedShow Answer

If your income increases from $40,000 to $48,000 and your consumption increases from $35,000 to $39,000, your marginal propensity to consume (MPC) is:

Correct AnswerverifiedShow Answer

The marginal propensity to consume is:

Correct AnswerverifiedShow Answer

The government wishes to close an inflationary gap by reducing real GDP by $400 billion. Assuming a tax multiplier of 4 and an income multiplier of 5, which of the following policy prescriptions would reduce the inflationary gap by $400 billion?

Correct AnswerverifiedShow Answer

A government spending and taxation policy to achieve macroeconomic goals is known as:

Correct AnswerverifiedShow Answer

If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:

Correct AnswerverifiedShow Answer

A tax multiplier equal to − 4.30 would imply that a $100 tax increase would lead to a:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 15-7 Aggregate demand and supply model Suppose the economy in Exhibit 15-7 is in equilibrium at point E₁ and the marginal propensity to consume ( MPC ) is 0.75. Following Keynesian economics, to lower the price level from 170 to 150 the government should raise taxes by:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 15-2 Aggregate demand and supply model Suppose the economy in Exhibit 15-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by:

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