Macro Ch. 16

Since the Social Security system began in 1935, the number of workers per retiree has stayed roughly the same. continually declined. continually risen. risen and declined with different generations.

continually declined.

Tax cuts on business income ________ aggregate demand. may increase or decrease would not change would increase would decrease

would increase

Which of the following is considered contractionary fiscal policy? Congress increases the income tax rate. The New Jersey legislature cuts highway spending to balance its budget. Congress increases defense spending. Legislation removes a college tuition deduction from federal income taxes.

Congress increases the income tax rate.

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of discretionary fiscal policy. automatic stabilizers. automatic monetary policy. discretionary monetary policy.

automatic stabilizers.

Tax cuts on business income increase aggregate demand by increasing consumption spending. government spending. business investment spending. wage rates.

business investment spending.

Tax cuts on business income increase aggregate demand by increasing wage rates. government spending. consumption spending. business investment spending.

business investment spending.

If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in taxes. government purchases. oil prices. the money supply and a decrease in interest rates.

government purchases.

Automatic stabilizers refer to a) the money supply and interest rates that automatically increase or decrease along with the business cycle. b) changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. c) changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. d) government spending and taxes that automatically increase or decrease along with the business cycle.

government spending and taxes that automatically increase or decrease along with the business cycle.

Which of the following is an objective of fiscal policy? discovering a cure for AIDs high rates of economic growth health care coverage for all Americans homeland security energy independence from Middle East oil

high rates of economic growth

A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________. decrease; rise; falls decrease; fall; rises increase; rise; falls increase; fall; rises

increase; fall; rises

Which of the following would be classified as fiscal policy? States increase taxes to fund education. The federal government passes tax cuts to encourage firms to reduce air pollution. The federal government cuts taxes to stimulate the economy. A state government cuts taxes to help the economy of the state. The Federal Reserve cuts interest rates to stimulate the economy.

The federal government cuts taxes to stimulate the economy.

Fiscal policy is determined by Congress and the president. the president and the Federal Reserve. Congress and the Federal Reserve. the Federal Reserve.

Congress and the president.

Which of the following provides health-care coverage to people age 65 and over? Health-Aid Medicaid Social Security Medicare

Medicare

Government transfer payments include which of the following? grants to state and local governments interest on the national debt national defense Social Security and Medicare programs

Social Security and Medicare programs

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented, what is the change in GDP, holding everything else constant? (Assume the price level stays constant.) a $300 billion increase in GDP a $133.33 billion decrease in GDP a $300 billion decrease in GDP a $30 billion increase in GDP a $133.33 billion increase in GDP

a $300 billion decrease in GDP

Which of the following would increase the size of the government purchases multiplier? a) a decrease in the amount saved by households from an increase in income b) an increase in the tax rate c) a decrease in the amount of consumption spending by households from an increase in income d) an increase in the quantity of imports purchased by households from an increase in income

a decrease in the amount saved by households from an increase in income

Suppose the government spending multiplier is 2. The federal government cuts spending by $40 billion. What is the change in GDP if the price level is not held constant? an increase of greater than $80 billion a decrease of more than $80 billion an increase equal to $80 billion an increase of less than $80 billion a decrease of less than $80 billion

a decrease of less than $80 billion

A change in consumption spending caused by income changes is ________ change in spending, and a change in government spending that occurs to improve roads and bridges is ________ change in spending. an expansionary; a contractionary an induced; an autonomous an autonomous; an induced a contractionary; an expansionary

an induced; an autonomous

An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________. decrease; rise; falls decrease; fall; rises increase; rise; falls increase; fall; rises

decrease; rise; falls

An increase in individual income taxes ________ disposable income, which ________ consumption spending. decreases; decreases increases; increases decreases; increases increases; decreases

decreases; decreases

The tax multiplier equals the change in ________ divided by the change in ________. equilibrium real GDP; taxes taxes; equilibrium real GDP consumption spending; taxes taxes; consumption spending

equilibrium real GDP; taxes

Fiscal policy refers to changes in a) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. b) federal taxes and purchases that are intended to achieve macroeconomic policy objectives. c) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. d) federal taxes and purchases that are intended to fund the war on terrorism.

federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

Social Security began as a "pay-as-you-go" system, meaning that payments to current retirees were paid a) as the government collected revenues from tariffs and excise taxes in the years Social Security payments were made. b) from taxes collected from retired workers. c) as long as the government had funds available. d) from taxes collected from current workers.

from taxes collected from current workers.

The three categories of federal government expenditures, in addition to government purchases, are defense spending, budgets of federal agencies, and transfer payments. defense spending, Social Security, and Medicare. interest on the national debt, grants to state and local governments, and transfer payments. interest on the national debt, defense spending, and transfer payments.

interest on the national debt, grants to state and local governments, and transfer payments.

Which of the following would not be considered an automatic stabilizer? a) rising income tax collections due to rising incomes during an expansion b) decreasing unemployment insurance payments due to decreased jobless during an expansion c) legislation increasing funding for job retraining passed during a recession d) declining food stamp payments due to more persons finding jobs during an expansion

legislation increasing funding for job retraining passed during a recession

The automatic budget surpluses and budget deficits that occur in the federal budget over the business cycle decrease potential GDP. increase potential GDP. stabilize the economy. destabilize the economy.

stabilize the economy.

The federal government debt equals the total value of U.S. Treasury bonds outstanding. the accumulation of past budget deficits. government spending minus tax revenues. tax revenues minus government spending.

the total value of U.S. Treasury bonds outstanding.