Question 1

If the fiscal policy makers aim to increase aggregate demand,they will likely enact:

Accepted Answer

A)  expansionary fiscal policy.
B)  contractionary fiscal policy.
C)  expansionary monetary policy.
D)  contractionary monetary policy.E) All of the above
F) C) and D)

Question 2

If the government cut taxes by $200,and the GDP increased $1,800 as a result,the MPC must be:

Accepted Answer

A)  0.90.
B)  0.95.
C)  9.
D)  5.E) C) and D)
F) B) and D)

Question 3

If the government wishes to decrease GDP by $2,000b,and the MPC is 0.6,it should:

Accepted Answer

A)  increase its spending by $1,200b.
B)  decrease its spending by $1,200b.
C)  increase its spending by $800b.
D)  decrease its spending by $800b.E) A) and B)
F) A) and C)

Question 4

If the government were to increase taxes,it would be enacting:

Accepted Answer

A)  contractionary fiscal policy.
B)  expansionary fiscal policy.
C)  a budgetary crisis intervention.
D)  expansionary budgetary policy.E) A) and B)
F) A) and C)

Question 5

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

Accepted Answer

A)  increase aggregate demand.
B)  decrease aggregate demand.
C)  increase aggregate supply.
D)  decrease aggregate supply.E) A) and D)
F) All of the above

Question 6

Contractionary fiscal policy is enacted when the overall effect of decisions about taxation and spending is to:

Accepted Answer

A)  reduce aggregate demand.
B)  increase aggregate demand.
C)  reduce aggregate supply.
D)  increase aggregate supply.E) A) and B)
F) A) and C)

Question 7

If the government wished to shift aggregate demand to the left,it might:

Accepted Answer

A)  decrease military spending.
B)  increase the amount of educational grants available.
C)  decrease corporate income taxes.
D)  All of these would cause a decrease in aggregate demand.E) None of the above
F) A) and B)

Question 8

If the government enacts contractionary fiscal policy,it could:

Accepted Answer

A)  reduce its spending.
B)  increase personal income taxes.
C)  increase corporate income taxes.
D)  All of these are contractionary.E) A) and B)
F) B) and C)

Question 9

If the government increased its spending by $200,and the GDP increased $1,000 as a result,the MPC must be:

Accepted Answer

A)  0.80.
B)  0.75.
C)  4.
D)  5.E) All of the above
F) None of the above

Question 10

If the government wishes to increase GDP by $1,200b,and the MPC is 0.75,it should:

Accepted Answer

A)  increase taxes by $300b.
B)  decrease taxes by $300b.
C)  increase taxes by $400b.
D)  decrease taxes by $400b.E) A) and B)
F) All of the above

Question 11

If the government wishes to decrease GDP by $2,100b,and the MPC is 0.6,it should:

Accepted Answer

A)  increase taxes by $1,400b.
B)  decrease taxes by $1,400b.
C)  increase taxes by $800b.
D)  decrease taxes by $800b.E) B) and D)
F) B) and C)

Question 12

If the marginal propensity to consume is 0.8,the taxation multiplier must be:

Accepted Answer

A)  5.
B)  -2.
C)  4.
D)  -4.E) A) and B)
F) None of the above

Question 13

If the government enacts contractionary fiscal policy,it:

Accepted Answer

A)  must want to slow economic activity.
B)  could increase taxes.
C)  expects aggregate demand to decrease.
D)  All of these are true.E) A) and D)
F) B) and D)

Question 14

An example of fiscal policy would be government:

Accepted Answer

A)  increasing the amount of available educational grants.
B)  decreasing the income tax.
C)  increasing corporate income taxes.
D)  All of these are examples of fiscal policy.E) B) and C)
F) All of the above

Question 15

According to this book,The American Recovery and Reinvestment Act of 2009:

Accepted Answer

A)  was successful.
B)  was unsuccessful.
C)  remains hotly debated whether it was successful or not.
D)  is known as the most effective legislation ever passed in U.S.history.E) A) and B)
F) A) and C)

Question 16

Democrats often argue in favor of what to push the economy toward economic recovery,as they did during the recession that began in 2008?

Accepted Answer

A)  Tax cuts
B)  Increase government spending
C)  Decrease government spending
D)  Encourage the public to save moreE) A) and B)
F) B) and D)

Question 17

If the MPC is 0.9,and the government cuts taxes by $400b,the overall effect on GDP will be:

Accepted Answer

A)  a decrease of $2,000b.
B)  an increase of $2,000b.
C)  a decrease of $3,600b.
D)  an increase of $3,600b.E) A) and D)
F) C) and D)

Question 18

The amount of time it takes for fiscal policy to have an impact on the economy creates:

Accepted Answer

A)  an information lag.
B)  a formulation lag.
C)  an implementation lag.
D)  a direction lag.E) A) and D)
F) All of the above

Question 19

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Accepted Answer

A)  holds,and people increase their spending.
B)  holds,and people save more.
C)  fails to hold,and people increase their spending.
D)  fails to hold,and people save more.E) A) and D)
F) None of the above

Question 20

The government-spending multiplier:

Accepted Answer

A)  is calculated as 1/(1 - MP
C)  .
B)  has a positive value.
C)  grows larger as the marginal propensity to consume increases.
D)  All of these are true.E) A) and C)
F) A) and B)

Exam 29: Fiscal Policy

An example of fiscal policy would be government:

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If the MPC is 0.9,and the government cuts taxes by $400b,the overall effect on GDP will be:

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If the government increased its spending by $200,and the GDP increased $1,000 as a result,the MPC must be:

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If the government enacts contractionary fiscal policy,it could:

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Democrats often argue in favor of what to push the economy toward economic recovery,as they did during the recession that began in 2008?

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If the government enacts contractionary fiscal policy,it:

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Contractionary fiscal policy is enacted when the overall effect of decisions about taxation and spending is to:

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If the marginal propensity to consume is 0.8,the taxation multiplier must be:

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If the government wishes to decrease GDP by $2,100b,and the MPC is 0.6,it should:

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If the government were to increase taxes,it would be enacting:

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The government-spending multiplier:

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We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

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If the government wishes to decrease GDP by $2,000b,and the MPC is 0.6,it should:

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If the government wished to shift aggregate demand to the left,it might:

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If the fiscal policy makers aim to increase aggregate demand,they will likely enact:

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According to this book,The American Recovery and Reinvestment Act of 2009:

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The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

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If the government cut taxes by $200,and the GDP increased $1,800 as a result,the MPC must be:

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The amount of time it takes for fiscal policy to have an impact on the economy creates:

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If the government wishes to increase GDP by $1,200b,and the MPC is 0.75,it should:

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