Macroeconomic model and fiscal policy


1-in the building the aggregate expenditure model ,keynes believe that

a)economies are nomally at full employment and thus frequently susceptible to bouts of inflation

b)massive unemployment of labor and capital created condition where sudden demand changes are unlikely to change prices

c)changes in aggregate expenditures are unable to affect the level of real out put in the economy

d)government intervention into the economy is the primary cause of business cycle fluctuation

2-expansionary fixal policy is so named because it

a)is designed to expand real GDP

b)involves an expansion of the nation money supply

c)necessarily expands the size of government

d)is aimed at achieving greater price stability

3-which one of the following statement about the federal budget deficit is correct

a)the federal budget deficit is found by subtracting government tax revenues from government spending in a particular year

b)the federal budget deficit is found by subtracting government tax revenues plus government borrowing from government spending in a particular year

c)the federal budget deficit is found by subtracting government revenues from the non investment type government spending in a particular year

d)the federal budget deficit is found by cumulating the differences between government spending and tax revenues over all years since the nations founding

4-which one of the following statements about the standardized budget is correct

a)the standardized budget tells us what the size of the federal budget deficit or surplus would be if the economy was at full employment

b)the standardized budget tells us that in a full employment economy the federal budget should be in balance

c)the standardized budget tells us the actual budget deficit or surplus realized in any given year

d)the standardized budget tells us that tax revenues should vary inversely with GDP

5-which one of the following is the best example of public investment

a)funding of regulatory agencies

b)government expenditures on food stamps

c)salaries of senators and representatives

d)construction of highways

6-an economist who favored expanded government would recommend

a)tax cuts during recession and reduction in government spending during inflation

b)tax cuts during recession and tax increases during inflation

c)tax increases in government spending during recession and tax increases during inflation

7-which one of the following statements about the standardized budget is correct

a)the standardized budget refers to the number of workers who are underemployed when the level of unemployment is 4 to 5 percent

b)the standardized budget refers to that portion of a full employment GDP that isnt consumed in the year its produced

c)the standardized budget refers to the size of the federal governments budgetary surplus or deficit when the economy is operating at full employment

d)the standardized budget refers to the inflationary impact that the automatic stabilizers have in a full employment economy

8-imports have the same effect on the current size of GDP as





9-which one of the following statements about dis saving is correct

a)dissaving occurs where saving exceed consumption

b)dissaving occurs where saving exceed income

c)dissaving occurs where consumption exceeds income

d)dissaving occurs where income exceed consumption

10-which one of the following represents the most contractionary fiscal policy

a)a $30 billion tax increase

b)a $30 billion tax cut

c)a $30 billion decreased in government spending

d)a $30 billion increase in government

11-the amount by which government expenditures exceed revenues during a particular year is the

a)GDP gap

b)full employment

c)public debt

d)budget deficit

12-a private closed economy includes

a)households and business ,but not government or international trade

b)households ,businesses ,and government but not international trade

c)households only

d)households ,businesses ,and international ,but not government

13-which one of following statements about discretionary fiscal policy is correct

a)discretionary fiscal policy refers to changes in taxes and government expenditures made by congress to stabilize the economy

b)discretionary fiscal policy refers to any change in government spending or taxes that destabilizes the economy

c)discretionary fiscal policy refers to the changes in taxes and transfers that occur as GDP changes

d)discretionary fiscal policy refers to the authority that the president has to change personal income tax rates

14-in the aggregate expenditures model its assumed that investment

a)changes by less in percentage terms than changes in real GDP

b)doesnt respond to changes in interest rates

c)doesnt change when real GDP changes

d)automatically changes in response to changes in real GDP

15-which one of the following represents the most expansionary fiscal policy

a)a $10 billion decrease in government spending

b)a $10 billion increase in government pending

c)a $10 billion tax cut

d)a $10 billion tax increase

16-the relation ship between investment and GDP is shown by the ———————-schedule

a)consumption of fixed capital




17-which one of the following statement correctly describes the multiplier effect

a)the multiplier effect means that a decline in the MPC can cause GDP to rise by several times that amount

b)the multiplier effect means that an increase in investment can cause GDP to change a larger amount

c)the multiplier effect means that a change in consumption can cause a larger increase in investment

d)the multiplier effect means that consumption is typically several times as large as saving

18-which one of following statements about efficiency wages is correct

a)efficiency wages are relevant to macroeconomics because they explain right ward shift in aggregate demande

b)efficiency wages are above market wages that bring forth so much added work effort that per unit production cots are lower than at market wages

c)efficiency wages are usually less than market wages

d)efficiency wages are wage payment necessary to compensate workers for unpleasant or risky work conditions

19-the recessionary expenditure gap associated with the recession of 2001 resulted from

a)a major increase in personal and corporate taxes

b)a rapid decline in investment spending

c)a rapid increase in imports resulting from large tariff reductions

d)the governments attempt to control hyper inflation

20-the graphical relation ship between the price level and the amount of real GDP that businesses will offer for sale is known as the —————————-curve

a)aggregate demand

b)aggregate supply

c)investment supply

d)investment demand

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