Macro Economics Chapter 11 - 13 Quiz Flashcards
Fiscal policy is government action to influence aggregate demand and in turn to influence the level of real GDP and the price level, through: A: expanding and contracting the money supply.B: regulation of net exports.C: changes in government spending and/or tax revenues.D: encouraging businesses to invest.
C
If the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP $200 billion, then by how much would they have to change taxes? A: -$240 million.B: -$200 million.C: -$180 million.D: -$50 million.
D
It is inflationary for government to increase spending if: A: it also cuts taxes.B: the aggregate supply curve is flat.C: the economy is at full employment.D: equilibrium real GDP is well below full employment.
C
If the economy is experiencing demand-pull inflation, then the appropriate government policy would be to shift the: A: aggregate demand curve by using a tax increase coupled with spending cuts.B: aggregate demand curve by using a tax increase coupled with more spending.C: aggregate demand curve by using a tax cut coupled with spending cuts.D: aggregate demand curve by using a tax cut coupled with more spending. E: aggregate supply curve by using a tax cut coupled with spending cuts.
A
Equal increases in government expenditures and taxes will: A: Cancel each other out so that the equilibrium level of output will remain unchanged.B: lead to an equal decrease in the equilibrium level of output.C: lead to an equal increase in the equilibrium level of output.D: lead to an increase in the equilibrium level of real GDP output that is larger than the initial change in government expenditures and taxes. E: lead to an increase in the equilibrium level of output that is smaller than the initial change in government expenditures and taxes.
C
Which of the following is the best example of an automatic stabilizer? A: Welfare payments.B: Foreign aidC: Defense spending.D: Highway construction.
A
According to supply-side fiscal policy, reducing tax rates on wages and profits will: A: create demand-pull inflation.B: lower the price level but may trigger a recession.C: result in stagflation.D: reduce both unemployment and inflation.
D
The national debt is unlikely to cause national bankruptcy because the federal government can: A: raise taxes.B: print money.C: refinance its debt.D: all of the above.
D
One concern over external national debt is that interest and principal payments transfer wealth overseas. The percentage of the national debt held in recent years by foreigners is approximately: A: 5 percent.B: 10 percent.C: 12 percent.D: 17 percent.E: 50 percent.
E
Crowding out occurs when the federal government: A: raises taxes to finance a budget deficit.B: refinances maturing U.S. Treasury bonds.C: borrows by selling bonds to finance a deficit.D: uses a budget surplus to pay off part of the national debt.
C
