Macro assign 5
The goal of expansionary fiscal policy is to increase: A.Aggregate demand B.Aggregate supply C.The price level D.Unemployment
A.Aggregate demand
The cyclically-adjusted surplus in the U.S. was +1.1% of GDP in 2000 and +0.5% of GDP in 2001. This suggests that the government during that period: A.Cut taxes and increased spending B.Increased taxes and cut spending C.Wanted to rein in inflation D.Did not change its discretionary fiscal policy
A.Cut taxes and increased spending
The set of fiscal policies that would be most contractionary would be a(n): A.Decrease in government spending and an increase in taxes B.Increase in government spending and a decrease in taxes C.Decrease in government spending and taxes D.Increase in government spending and taxes
A.Decrease in government spending and an increase in taxes
When the Federal government takes budgetary action to stimulate the economy or rein in inflation, such policy is: A.Discretionary Fiscal Policy B.Automatic Fiscal Policy C.Active Monetary Policy D.Active Federal Policy
A.Discretionary Fiscal Policy
The American Recovery and Reinvestment Act of 2009 is a clear example of: A.Discretionary expansionary fiscal policy B.Discretionary contractionary fiscal policy C.Nondiscretionary contractionary fiscal policy D.Nondiscretionary expansionary fiscal policy
A.Discretionary expansionary fiscal policy
The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be: A.In deficit B.In surplus C.Balanced D.Unchanged
A.In deficit
In Year 1, the actual budget deficit was $125 billion and the cyclically-adjusted deficit was $100 billion. In Year 2, the actual budget deficit was $105 billion and the cyclically-adjusted deficit was $101 billion. It can be concluded that from Year 1 to Year 2: A.Real GDP increased B.Real GDP decreased C.Full employment was attained D. Government spending increased
A.Real GDP increased
As the economy declines into recession, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system: A.Serves as an automatic stabilizer for the economy B.Offsets the timing problem for fiscal policy C.Decreases real interest rates in the economy D.Increases crowding out in the economy
A.Serves as an automatic stabilizer for the economy
The stimulus package enacted by the Federal government in 2009 was intended to: A.Shift the aggregate demand curve to the right. B.Bring inflation down. C.Close an inflationary expenditures-gap. D.Shift the aggregate demand curve to the left.
A.Shift the aggregate demand curve to the right.
Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.: A.aggregate demand curve would shift to the right. B.aggregate supply curve would shift to the left. C.aggregate supply curve would shift to the right. D.aggregate demand curve would shift to the left.
A.aggregate demand curve would shift to the right.
The immediate-short-run aggregate supply curve represents circumstances where: A.both input and output prices are fixed. B.both input and output prices are flexible. C.input prices are fixed, but output prices are flexible. D.input prices are flexible, but output prices are fixed.
A.both input and output prices are fixed.
Graphically, demand-pull inflation is shown as a: A.rightward shift of the AD curve. B.leftward shift of the AS curve. C.leftward shift of the AD curve. D.rightward shift of the AS curve.
A.rightward shift of the AD curve.
The aggregate demand curve: A.shows the amount of real output that will be purchased at each possible price level. B.shows the amount of expenditures required to induce the production of each possible level of real output. C.is downsloping because production costs decline as real output increases. D.is upsloping because a higher price level is necessary to make production profitable as production costs rise.
A.shows the amount of real output that will be purchased at each possible price level.
The aggregate supply curve: A.shows the various amounts of real output that businesses will produce at each price level. B.is downsloping because real purchasing power increases as the price level falls. C.gets steeper as the economy moves from the top of the curve to the bottom of the curve. D.is explained by the interest rate, real-balances, and foreign purchases effects.
A.shows the various amounts of real output that businesses will produce at each price level.
When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of: A.wage contracts. B.the wealth effect. C.inflexible product prices. D.the foreign purchases effect.
A.wage contracts
If the Congress passes legislation to decrease taxes to counter the effects of a recession, then this would be an example of a(n): A.Contractionary fiscal policy B.Expansionary fiscal policy C.Supply-side fiscal policy D.None of the above
B.Expansionary fiscal policy
Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that: A.Reinforce changes in GDP B.Help offset changes in GDP C.Produce a cyclically-adjusted budget D.Produce a standardized budget
B.Help offset changes in GDP
The interest-rate effect suggests that: A.an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. B.an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. C.an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending. D.a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
B.an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
If there is a recession, the appropriate fiscal policy is to _________government spending and/or _______income tax rates: A.decrease; increase B.increase; decrease C.decrease; decrease D.increase; increase
B.increase; decrease
The appreciation of a country's currency causes the price of exports to: A.rise and the prices of imports to rise. B.rise and the prices of imports to fall. C.fall and the prices of imports to rise. D.fall and the prices of imports to fall.
B.rise and the prices of imports to fall.
An economy is experiencing a high rate of inflation. The government wants to reduce aggregate demand by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government increase taxes to achieve its objective? A.$9 billion B.$6 billion C.$12 billion D.$16 billion
C.$12 billion
Which of the following would most likely shift the aggregate demand curve to the right? A.Increased fear that a recession will cause workers to lose their jobs. B.An increase in personal income tax rates. C.An increase in stock prices that increases consumer wealth. D.A reduction in household borrowing because of tighter lending practices.
C.An increase in stock prices that increases consumer wealth.
AS shifting to the right could be caused by a(n): A.stricter government regulations. B.increase in the prices of imported resources. C.decrease in the prices of domestic resources. D.increase in business taxes.
C.decrease in the prices of domestic resources.
The short-run aggregate supply curve represents circumstances where:. A.both input and output prices are fixed. B.both input and output prices are flexible. C.input prices are fixed, but output prices are flexible. D.input prices are flexible, but output prices are fixed.
C.input prices are fixed, but output prices are flexible.
Other things equal, an improvement in productivity will: A.shift the aggregate demand curve to the left. B.shift the aggregate supply curve to the left. C.shift the aggregate supply curve to the right. D.increase the price level.
C.shift the aggregate supply curve to the right.
One timing problem with fiscal policy to counter a recession is an "operational lag" that occurs between the: A.Time the need for the fiscal action is recognized and the time that the action is taken B.Start of a predicted recession and the actual start of the recession C.Start of the recession and the time it takes to recognize that the recession has started D.Time fiscal action is taken and the time that the action has its effect on the economy
D.Time fiscal action is taken and the time that the action has its effect on the economy
Other things equal, a reduction in personal and business taxes can be expected to: A.increase aggregate demand. B.increase real output. C.increase consumption and investment spending. D.do all of the above.
D.do all of the above.
If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift: a.rightward by $50 billion at each price level. b.leftward by $40 billion at each price level. c.leftward by $50 billion at each price level. d.rightward by $10 billion at each price level.
a.rightward by $50 billion at each price level.
