Economics pt.4
An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government raise taxes to achieve its objective? A.$6 billion B.$9 billion C.$12 billion D.$16 billion
$12 billion
The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a: A.Trade deficit B.Trade surplus C.Budget deficit D.Budget surplus
Budget deficit
Contractionary fiscal policy would tend to make a budget deficit become: A.Bigger B.Smaller C.A trade deficit D.A trade surplus
Smaller
Refer to the above graph. If the economy was initially in equilibrium at point 3 and a government deficit makes interest rates increase by 4 percentage points, then the crowding-out effect would be a reduction of: A.$10 billion in investment B.$20 billion in investment C.$30 billion in investment D.$6 billion in investment
$20 billion in investment
The Social Security Program is designed to pay: A.Current retirees using funds from their past contributions B.Current retirees using funds from current contributions C.The lower income groups using funds collected from high-income groups D.Older current workers using funds from younger current workers
.Current retirees using funds from current contributions
Which of the following fiscal policy changes would be the most expansionary? A.A $40 billion increase in government spending B.A $20 billion tax cut and $20 billion increase in government spending C.A $10 billion tax cut and $30 billion increase in government spending D.A $40 billion tax cut
A $40 billion increase in government spending
The lag between the time that the need for fiscalaction is recognized and the time action is actually taken is referred to as the: A.Crowding-out lag B.Recognition lag C.Operational lag D.Administrative lag
Administrative lag
As of 2012, most of the U.S. Federal debt was owed to: A.Americans B.Foreign governments C.The Chinese people D.The Japanese people
Americans
Refer to the above graph. What combination would most likely cause a shift from AD1to AD3? A.An increase in taxes and an increase in government spending B.A decrease in taxes and an increase in government spending C.An increase in taxes and a decrease in government spending D.A decrease in taxes and a decrease in government spending
An increase in taxes and a decrease in government spending
Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely: A.Crowd out future public investment B.Reduce the economy's future productive capacity C.Complement private investment D.Crowd out private investment
Complement private investment
State and local governments are limited in their ability to respond to recessions because of: A.Local politics and politicians B.Their desire to always run budget surpluses C.The lack of proper economic research and assistance D.Constitutional and other requirements to balance their budgets
Constitutional and other requirements to balance their budgets
You are given the following information about aggregate demand at the existingprice level for an economy: (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here? A.Increase government spending and taxes B.Decrease government spending and taxes C.Decrease government spending and increase taxes D.Increase government spending and decrease taxes
Decrease government spending and increase taxes
The set of fiscal policies that would be most contractionary would be a(n): A.Increase in government spending and taxes B.Decrease in government spending and taxes C.Increase in government spending and a decrease in taxes D.Decrease in government spending and an increase in taxes
Decrease in government spending and an increase in taxes
The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending would: A.Increase, thus partially offsetting the fiscal policy B.Increase, thus partially reinforcing the fiscal policy C.Decrease, thus partially offsetting the fiscal policy D.Decrease, thus partially reinforcing the fiscal policy
Decrease, thus partially offsetting the fiscal policy
The American Recovery and Reinvestment Act of 2009 is a clear example of: A.Nondiscretionary fiscal policy that made the cyclically-adjusted budget become more positive B.Nondiscretionary fiscal policy that made the cyclically-adjusted budget become more negative C.Discretionary fiscal policy that made the cyclically-adjusted budget become more positive D.Discretionary fiscal policy that made the cyclically-adjusted budget become more negative
Discretionary fiscal policy that made the cyclically-adjusted budget become more negative
Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt: A.Crowds out private investment B.Does not impose a large burden on future generations C.Has a pro-cyclical economic effect on the economy D.Can result in the bankruptcy of the Federal government
Does not impose a large burden on future generations
In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could: A.Increase taxes by$16 billion B.Increase taxes by $24 billion C.Decrease government spending by $10 billion D.Decrease government spending by $16 billion
Increase taxes by$16 billion
If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be: A.Increased government spending or increased taxation, or a combination of the two actions B.Increased government spending or decreased taxation, or a combination of the two actions C.Increased government spending or increased taxation, but not a combination of the two actions D.Decreased government spending or decreased taxation, or a combination of the two actions
Increased government spending or decreased taxation, or a combination of the two actions
Refer to the figure above. The economy is at equilibrium at point B.What would expansionary fiscal policy do? A.Move the economy from point B towards point A B.Move the economy from point B towards point C C.Move the economy from point B downward along AD2 D.Move the economy from point B upward along AD2
Move the economy from point B towards point A
Assume that if there was no crowding-out, an increase in government spending would increase GDP by $100billion. On the other hand, if there had been full crowding-out, then GDP would have: A.Increased by more than $100 billion B.Increased by less than $100 billion C.Increased by $100 billion D.Not increased
Not increased
Refer to the above graph. The economy is initially at point 1. Which of the following events would cause a shift that would help offset the crowding-out effect? An increase in: A.Interest rates caused by a change in Federal Reserve policy B.Profit expectations resulting from an increasein government spending C.Business taxes levied by government to pay for new government programs D.The degree of excess capacity in business stemming from a recession
Profit expectations resulting from an increase in government spending
The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n): A.Budget lag B.Recognition lag C.Operational lag D.Administrative lag
Recognition lag
A major concern with the Social Security trust fund is that: A.Surpluses for Social Security are too large B.The Federal government buys too many government securities C.Costs for administering the fund are greater than the current revenue D.The fund will exhausted in a coupleof decades
The fund will exhausted in a couple of decades
A public debt which is owed to foreigners can be burdensome because: A.Foreign interest rates are persistently higher than domestic interest rates B.The payment of interest reduces the volume of goods and services available for domestic uses C.The payment of interest will conflict with a nation's foreign aid programs D.The payment of interest will necessarily have a deflationary effect on prices in the paying nation
The payment of interest reduces the volume of goods and services available for domestic uses
Medicare and Social Security are similar in the following respects, except: A.They are both "pay-as-you-go" plans B.Their trust funds are both projected to be depleted within the next 30 years C.Contributions are collected from both employers and employees D.They are both intended to benefit older current workers
They are both intended to benefit older current workers
