Exam Ten Flashcards
In the macroeconomic model presented in the circular flow diagram in the text, what are the three injections?
Intended investment, government spending, and exports
In the macroeconomic model presented in the circular flow diagram in the text, what are the three leakages?
Savings, taxes, and imports
Suppose that the marginal propensity to consume is 0.9. What is the tax multiplier for a lump sum tax in this case?
?9
The automatic stabilization effect of fiscal policy refers to the fact that…
government spending tends to go down during economic expansions.
The most likely economic situation in which a government would implement contractionary fiscal policy is…
high inflation.
The time it takes for active fiscal policies to result in actual changes in the economy is referred to as…
an outside lag.
The time it takes Congress to debate and agree upon a tax policy change is referred to as…
a legislative lag.
What are the two main sources of inflows of funds to the federal government in the United States?
Personal income taxes and social security taxes
Which of the following is NOT true about the U.S. federal debt?
Someday, the debt will have to all be paid off.
Which one of the following statements is TRUE?
A growing percentage of the U.S. federal government debt is owed to foreign bond holders.
T/F: A transmission lag refers to the time it takes the government to collect economic data on variables such as inflation and unemployment.
False
T/F: According to the text, the largest source of federal outlays in the United States is national defense.
False
T/F: Data lags and recognition lags were discussed in the text as two types of inside lags.
True
T/F: During the 1990s in the United States, federal government receipts generally increased while government outlays generally decreased.
True
T/F: If the government increases taxes by $3 billion but also increases spending by $3 billion, according to the Keynesian macroeconomic model the equilibrium level of output will remain the same.
False
