Macroeconomics Unit 6

A government annually collects $230 billion in tax revenue and allocates $29 billion to its universal healthcare spending. What percentage of this government's budget is spent on healthcare?

12.60%

A government collects $600 billion annually in tax revenue. Each year it allocates $35 billion to healthcare and $50 billion for education. What percentage of annual tax revenue is allocated to these two categories of government spending?

14.16%

In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012?

2010: 1.79 dollars, 2012: 1.59 dollars

If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as:

S + (M - X) = I + (G - T)

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following?

a corresponding change in private saving

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right.

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.

an estate and gift tax; to the next generation

If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger.

an inflationary increase in the price level

If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then:

automatic stabilizers will decrease government spending and increase tax revenue.

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus.

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.

corporate profits

A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy.

exchange rate depreciation

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

If a country's GDP increases, but its debt decreases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits?

increasing exchange rates

A moderate increase in a budget deficit that leads to a _____________________ is not necessarily a cause for concern.

moderate increase in a trade deficit and a moderate appreciation of the exchange rate

Suppose you are analyzing data for an economy in which Ricardian neutrality holds true. If the budget deficit increases by 50, then:

private savings will increase by 50

If South Dakota's governor reports a budget surplus in 2011, that state government likely:

received more in taxes than it spent in that year.

If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then:

the central bank might react with an expansionary monetary policy.

If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and 87 U.S. dollars in 2010, then:

the dollar strengthened against the peso.

In most developed countries, the government plays a large role in society's investment in human capital through _________________________.

the education system

A government began 2013 with a budget deficit and a trade deficit. During the year, the government changed its policy and is now running a budget surplus. If all other factors hold constant, this change in policy will cause:

the exchange rate and the trade deficit to decrease.

A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause:

the exchange rate and the trade deficit to increase.

If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget.

the standardized employment budget

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________.

the tools of demand and supply

When inflation begins to climb to unacceptable levels in the economy, the government should:

use contractionary fiscal policy to shift aggregate demand to the right.