chapter 22! Flashcards
In our macro model, government purchases (G) is
▼
with respect to national income.
autonomous
G does not include ▼ government purchases of goods and services government transfer payments . Net tax revenue (T) is total tax revenue collected by all governments, minus ▼ total transfer payments income .
government transfer payments; total transfer payments
The net tax rate, t, indicates the increase in tax revenues generated when national income increases by ▼ $100 $1 $1000 .
$1
T enters the AE function only indirectly through its effect on ▼ investment disposable income net exports in the consumption function.
disposable income
If G is larger than T, there is a ▼ budget deficit balanced budget budget surplus . If G is smaller than T, there is a ▼ budget surplus balanced budget budget deficit . The budget is in balance when ▼ G = T G less than T G greater than T .
budget deficit; budget surplus; G = T
Consider the government's budget balance. Suppose G = 430 and the government's net tax revenue is 14 percent of Y. The government budget is balanced when Y = \_\_\_\_\_\_\_\_. A. 2 comma 150 B. 3 comma 992 C. 3 comma 071 D. 490 E. 3 comma 378
C.
3071
Which of the following is correct regarding the role of government in the aggregate expenditure model?
A.
Net tax revenues enter the AE function indirectly through its effect on disposable income.
B.
Transfer payments directly affect aggregate expenditures.
C.
When government has a budget surplus comma the budget balance will be negative.
D.
The budget balance will increase if government spending increases.
E.
Private saving is always smaller than budget balance.
A.
Net tax revenues enter the AE function indirectly through its effect on disposable income.
Consider the government's budget balance. Suppose G=425 and the government's net tax revenue is = to 0.15Y. When Y = 2 comma 500, the government is running a budget \_\_\_\_\_\_\_\_. A. surplus of 70 B. balance C. surplus of 50 D. deficit of minus50 E. deficit of 50
E.
In the 2009 and 2010 Canadian federal budgets in the midst of a major global recession, the minister of finance presented a plan to stimulate the economy. a. Describe the basic fiscal tools at his disposal. The basic fiscal tools are A. net exports and taxation. B. government spending and foreign trade. C. foreign trade and consumption. D. government spending and taxation.
D.
government spending and taxation.
b. Explain the effect on GDP from an increase in spending by $5 billion.
An increase in spending by $5 billion will add
A.
directly to aggregate demand by this amount and cause an eventual change in national income equal to more than $ 5 billion.
B.
indirectly to disposable income and cause an eventual change in national income equal to $5 billion.
C.
indirectly to disposable income, only a fraction of which (determined by the MPC) will than be spent, i.e. national income will change by less than $5 billion.
D.
indirectly to disposable income by this amount and cause an increase in national income equal to less than $5 billion due to multiplier effect.
A.
directly to aggregate demand by this amount and cause an eventual change in national income equal to more than $ 5 billion.
c. Explain the effect on GDP from a tax rebate equal in value to $5 billion.
A tax rebate equal in value to $5 billion will add
A.
directly to disposable income comma only a fraction of which (determined by the MPC) will than be spent.
B.
indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion.
C.
directly to disposable income, a change in national income is unknown as it depends on the value of simple multiplier that in reality is closer to 1 than to 2.
D.
directly to aggregate demand by this amount and cause an increase in national income lead to an eventual change in national income equal to $ 5 billion due to multiplier effect.
A.
directly to disposable income comma only a fraction of which (determined by the MPC) will than be spent.
d. Did the minister of finance choose to emphasize increases in government spending or tax reductions in his 2009 and 2010 federal budgets?
In his 2009 and 2010 federal budget, the minister of finance chose to emphasize
A.
tax reductions as far as their eventual effect on national income will be larger.
B.
both increases in government spending and tax reductions as their eventual effect on national income is unpredictable.
C.
increases in government spending as far as their eventual effect on national income will be larger.
C.
increases in government spending as far as their eventual effect on national income will be larger.
a. In our macro model, exports (X) are
▼
dependent
autonomous
with respect to domestic national income, but the X function will shift in response to changes in
▼
domestic income and domestic relative prices
foreign income and international relative prices
.
autonomous; foreign income and international relative prices
The marginal propensity to import (m) indicates the increase in desired ▼ exports imports when national income rises by ▼ $1000 $100 $1 .
imports; $1
The equation for the net export function (NX) is ▼ NX = X minus mY NX = mY minus X . As national income rises, imports ▼ fall rise ; NX is therefore ▼ positively negatively related to national income.
NX = X minus mY; rise; positively
