ECO 201 Principles of Microeconomics Chapter 13 Quiz Answers
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Saint Leo ECO 201 Chapter 13 Quiz Answers
1. Prior to the congressional and presidential actions, careful studies by government economists indicated that the direct multiplier effect of a rise in government expenditures on equilibrium real GDP is equal to 6. In the 12 months since the increase in government spending, however, it has become clear that the actual ultimate effect on real GDP will be less than half of that amount. This could have happened because of all the following except
2. Another year and a half elapses following passage of the government spending boost. The government has undertaken no additional policy actions, nor have there been any other events of significance. Nevertheless, by the end of the second year, real GDP has returned to its original level, and the price level has increased sharply. This possibly happened because
3. Fiscal policy refers to
4. When an economist is using the term "discretionary" as in discretionary spending, they are referring to the
5. Suppose that the economy is shown to the right.
This economy is currently experiencing
6. Suppose that the economy is shown to the right.
This economy is currently experiencing
7. You are a member of Congress. The economy is currently experiencing an inflationary gap. Which of the following are fiscal policies that Congress can enact in an attempt to correct the economy?
8. You are a member of Congress. The economy is currently experiencing a recessionary gap. Which of the following are fiscal policies that Congress can enact in an attempt to correct the economy?
9. If the Ricardian equivalence theoremis not relevant, then an income-tax-rate cut
10. U.S. real disposable income temporarily jumped by nearly $500 billion.
However, household real consumption spending did not increase in response to the short-lived increase in real disposable income because
11. Which of the following economic theories can be used to account for this apparent non-relationship between real consumption and real disposable income in the late spring of 2008?
12. Expansionary fiscal policy that creates a budget deficit can lead to crowding out. This crowding out effect is exhibited by
13. Increased government spending crowds out investment due to
14. Currently the government has a balanced budget. It decides to follow an expansionary fiscal policy of reducing taxes by $100 billion. Which of the following statements bests describes the Ricardian Equivalence Theorem under these conditions?
15. The Ricardian Equivalence Theorem implies that expansionary fiscal policy that creates a budget deficit will result in
16. The US government decides to follow expansionary fiscal policy. Congress is meeting in a late session on the last day before it breaks for vacation. One of the Representatives makes a statement, "It does not matter what we spend the money on, let's just pass the bill and go home."
Evaluate the accuracy of the Representative's belief by choosing either the correct affirmation or rebuttal below.
17. In the extreme case of direct expenditure offsets the
18. The Laffer curve indicates
19. According to the supply side economists a(n) decrease in marginal tax rates will
20. When there is an economic downturn, Congress and the President use fiscal policyto stabilize real GDP. But the conduct of the fiscal policy involves several time lags, such as the recognition time lag that causes a delay in identification of the economic problem, the action time lag that is caused by the delay in Congressional approval of the policy, and the effect time lag that arises because policy actions take time to exert their full effects on the economy. These time lags could actually cause discretionary fiscal policy to
21. There are several time lags involved when fiscal policy is applied. The first hurdle faced by a government is
22. Which of the following statements is correct?
23. Given the existence of time lags, there is potential danger in using fiscal policy. Which of the following outcomes could occur because of the existence of such time lags?
24. The government just passed a new tax bill that will be applied to the economy next year. Most people will not immediately feel the impact of this new tax bill and not adjust their W-2 tax forms. The impact of the new tax bill won't become apparent to them until the following April when their tax bills are due. This problem is referred to as the
25. The Congressional meetings, discussions, arguments, debates over fiscal policy and the subsequent signing or vetoing by the President of a bill are part of the
26. Which of the following statements is true when considering time lags?
27. How do automatic stabilizerswork?
28. Suppose that the economy is presently operating at full employment. If there is an increase in national income, which of the following will occur automatically?
29. Automatic stabilizers
30. The purpose of automatic stabilizers is to
31. Which of the following is not an automatic stabilizer?
32. ...
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