chap 16

What is the difference between federal government purchases​ (spending) and federal government​ expenditures? A. Government expenditures are included in government purchases. B. Government purchases are included in government expenditures. C. Government purchases refer to spending for which no good or service is received. D. They are the same.

Government purchases are included in government expenditures.

After September​ 11, 2001, the federal government increased military spending on wars in Iraq and Afghanistan. Is this increase in spending considered fiscal​ policy? A. Yes. Fiscal policy refers to changes in government spending and taxes. B. No. The increase in defense spending after that date was designed to achieve homeland security objectives. C. Yes. Increases in defense spending are designed to achieve macroeconomic policy objectives. D. No. Fiscal policy refers to changes in interest rates and the money supply.

No. The increase in defense spending after that date was designed to achieve homeland security objectives. Your answer is correct.

When is it considered​ "good policy" for the government to run a budget​ deficit? A. When borrowing is used to pay for social insurance programs. B. When borrowing is used for current expenses. C. When borrowing is used for​ long-lived capital goods. D. All of the above.

When borrowing is used for​ long-lived capital goods.

How does a budget deficit act as an automatic stabilizer and reduce the severity of a​ recession? A. During​ recessions, tax obligations fall due to falling wages and profits. B. Transfer payments to households increase. C. Consumers spend more than they would in the absence of social insurance​ programs, like unemployment. D. All of the above.

all of the above

Increased government debt can lead to higher interest rates​ and, as a​ result, crowding out of private investment spending. In terms of borrowing​ (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the​ economy? A. ​Debt-spending on highways and ports. B. ​Debt-spending on education. C. ​Debt-spending on research and development. D. All of the above.

all of the above

What are the gains to be had from simplifying the tax​ code? A. Greater clarity of the decisions made by households and firms. B. Increased efficiency of households and firms. C. Resources from the tax preparation industry freed up for other endeavors. D. All of the above.

all of the above

​One-time tax​ rebates, such as those in 2001 and​ 2008, increase consumption spending by less than a permanent tax cut because​ one-time tax rebates increase A. taxable income. B. current income. C. the multiplier effect. D. permanent income.

current income.

The figure to the right illustrates the economy using the Dynamic Aggregate Demand and Aggregate Supply Model If actual real GDP in 2006 occurs at point B and potential GDP occurs at LRAS 06 we would expect the federal government to pursue​ a(n) expansionary contractionary fiscal policy. If the​ government's policy is​ successful, what is the effect of the policy on the following macroeconomic​ indicators? Actual real GDP Potential real GDP Price level Unemployment

expansionary Actual real GDP - decrease Potential real GDP - does not change Price level - decreases Unemployment - increases

Policy that is specifically designed to affect aggregate supply and increase incentives to​ work, save, and start a​ business, by reducing the tax wedge LOADING... is called A. ​demand-side economics. B. ​tax-and-spend economics. C. ​supply-side economics. D. labor economics.

supply-side economics.

From an understanding of the multiplier​ process, explain why an increase in the tax rate would decrease the size of the government purchases multiplier. The value of the government purchases multiplier would decrease because in the formula for the multiplier A. the MPC is multiplied by​ (t minus 1). B. the MPC is multiplied by​ (1 minus t). C. the MPC is multiplied by t. D. the MPC is multiplied by minus t. ​Similarly, explain why a decrease in the marginal propensity to import would increase the size of the government purchases multiplier. The value of the government purchases multiplier would decrease because in the formula for the multiplier the denominator is A. 1​ + ​[MPC X (1 - t) - MPI] B. 1 - [MPC X (1 - t) + MPI] C. 1 - [MPC X (1 - t) - ​MPI] D. 1​ + ​[MPC X (1 - t) + MPI]

the MPC is multiplied by​ (1 minus t). 1 - [MPC X (1 - t) - ​MPI]