Question
16.If the MPS = 0.2, the multiplier would be A. 0.5. B. 1. C. 2. D. 17.The relationship between the level of prices and the
16.If the MPS= 0.2, the multiplier would be
A.
0.5.
B.
1.
C.
2.
D.
17.The relationship between the level of prices and the quantity of real GDP supplied is known as
A.
aggregate supply.
B.
aggregate demand.
C.
market supply.
D.
market demand.
18.The longrun aggregate supply curve is
A.
a horizontal line at the current price level.
B.
a vertical line at potential output.
C.
downward sloping.
D.
upward sloping.
19.Output in the long run is determined by which of the two following factors when an economy operates at fullemployment?
A.
capital and labor
B.
the"real" GDP and purchases
C.
imports and exports
D.
capital and supply
20.Recall the Application about the factors involved in causingrecessions, and the causes of recessions in the United States from 1893 to 1990 to answer the followingquestion(s).
According to thisApplication, the recession in 1981 was caused by
A.
an decrease in aggregate supply resulting from U.S. bank collapses.
B.
massive immigration from Europe to the United States.
C.
increasing oil prices which resulted in a decrease in aggregate supply.
D.
the government cutting back on aggregate demand to reduce inflation.
21.When there is a shift the aggregate supply curve caused by factors external to anation's economy, it is called
A.
a trade imbalance.
B.
an economic anomaly.
C.
a supply shock.
D.
government control.
22.What are the two tools of fiscal policy that governments can use to stabilize aneconomy?
A.
government spending and taxation
B.
government spending and technology improvements
C.
taxation and controlling exports
D.
taxation and controlling imports
23.Contractionary policies are policies designed to
A.
increase the federal deficit.
B.
reduce the level of real GDP.
C.
increase the level of real GDP.
D.
increase government spending.
24.Expansionary policies are policies designed to
A.
decrease government spending.
B.
reduce the level of real GDP.
C.
increase the level of real GDP.
D.
reduce the federal deficit.
25.Policies taken to move the economy closer to potential output
A.
are lagging policies or automatic policies.
B.
must necessarily be contractionary policies.
C.
must necessarily be expansionary policies.
D.
are called stabilization policies.
26.The time it takes for a policy to actually work is known as
A.
fiscal policy.
B.
crowding out.
C.
outside lags.
D.
inside lags.
27.Why are transfer payments not included inGDP?
A.
They do not represent payments to those who contributed resources to currently produced goods or services.
B.
The amount is too low to have any effect.
C.
Money companiesreceive from the governmentisn't reported.
D.
Unemployment varies andcan't be tracked.
28.When the government conducts activist fiscalpolicy, what type of spending does it usuallyuse?
A.
discretionary spending
B.
strategic spending
C.
net interest spending
D.
entitlement and mandatory spending
29.The share of corporate tax in total federal revenues
A.
has declined over the past few decades to a relatively low level.
B.
is larger than the other components of federal revenue.
C.
is the smallest of all the components of federal tax revenue.
D.
has grown significantly in each of the past 10 years.
30.Proponents of the estate and gift tax argue that the tax is necessary because
A.
it is the primary source of funding for Medicare and Medicaid.
B.
it generates a large portion of total federal revenue.
C.
it prevents"unfair" accumulation of wealth across generations.
D.
it is only applied to items that have not previously been taxed.
31.One school of thought that emphasizes the role that taxes play in aneconomy's supply of output is known as
A.
supplyside economics.
B.
taxandspend economics.
C.
classical economics.
D.
demandpull economics.
32.According to supplyside economics, a(n)________ in the tax rate tends to increase the labor supply and________ aggregate output.
A.
decrease; decrease
B.
decrease; increase
C.
increase; decrease
D.
increase; increase
33.Suppose the government runs a budget surplus in a given year. It can reduce its overall federal debt by
A.
buying back bond its has sold to the public.
B.
increasing taxes on luxury items.
C.
forcing a change in net exports.
D.
not buying anything on credit.
34.Recall the Application about the Joint Committee on Taxation and how Congress accounts for the dynamic effects of its policies to answer the following question.
The results highlighted in this Application show that PresidentTrump's tax cuts resulted in
A.
a decrease in tax revenue.
B.
an increase in tax revenue.
C.
no change in tax revenue.
D.
an increase in tax revenues earlyon, before tax revenues decreased in the long run.
35.Automatic stabilizers
A.
require explicit actions by policy makers to become active.
B.
magnify fluctuations in the economy.
C.
work without the need for decisions from Congress or the White House.
D.
increase taxes during recessions.
36.Which of the following is an example of an automaticstabilizer?
A.
More unemployment benefits are paid during a recession.
B.
Congress increases the tax rate during an expansion.
C.
Welfare payments decrease during a recession.
D.
Congress authorizes spending increases during a recession.
37.The10% tax surcharge in 1968 did not have much effect onpeople's consumption because
A.
people knew the tax was temporary.
B.
people thought the tax was for a good cause.
C.
people thought the tax was small.
D.
people knew the tax was permanent.
38.The10% tax surcharge in 1968 was only for 1year, and people deemed the tax was temporary. As aresult, the tax
A.
resulted in a large drop inpeople's consumption.
B.
resulted in a large increase inpeople's consumption.
C.
causedpeople's consumption to become zero.
D.
did not have much effect onpeople's consumption.
39.The Clinton administration inherited a budget deficit from its predecessor. President Clinton instituted major tax increases that
A.
brought the budget into balance and eventually into a surplus.
B.
reduced the size of the deficit but could not eliminate it.
C.
increased the budget deficit during his entire term.
D.
reduced the budget deficit but increased the federal debt.
40.The largest fiscal stimulus package enacted in U.S. history was done during whoseadministration?
A.
President Donald Trump
B.
President Barack Obama
C.
President Bill Clinton
D.
President George W. Bush
41.In2017, PresidentTrump's major tax cut included a cut in the corporate tax rate from
A.
29 to 24 percent.
B.
50 percent to zero.
C.
48 to 23 percent.
D.
35 to 22 percent.
42.Recall the Application about the success of the 2009 stimulus package to answer the followingquestion(s).
The Obama stimulus package was implemented to assist the economy in its recovery from recession. This package was designed to shift
A.
aggregate demand and aggregate supply to the left.
B.
aggregate supply to the left.
C.
aggregate demand to the left.
D.
aggregate demand to the right.
43.When prices do not change verymuch, the incomeexpenditure model can be used to understand economic fluctuation in the
A.
federal budget allocation.
B.
fiscal year.
C.
short run.
D.
long run.
44.John Maynard Keynes argued that the fundamental problem which led to the world depression was
A.
negative net exports on goods and services.
B.
a decreasing supply of goods and services.
C.
a shortage of goods and services.
D.
insufficient demand for goods and services.
45.The incomeexpenditure model focuses on changes in
A.
price.
B.
import restrictions.
C.
operational lags.
D.
output levels.
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