Question 1

Everything else remaining the same,as the economy enters an expansion,

Accepted Answer

During an economic expansion, more people are employed and earning income, which leads to an increase in tax revenues as people pay more taxes on their income. At the same time, since more people are employed, fewer may need to rely on transfer payments like unemployment benefits or welfare, leading to a decrease in transfer payments.

Question 2

A tax on interest income ________.

Accepted Answer

The answer of A tax on interest income ________.
...

Question 3

If the economy is in an expansion,and the federal government is running a deficit,then a recession would automatically

Accepted Answer

The answer of If the economy is in an expansion,and...

Question 4

Suppose that in China,investment is $400 billion,saving is $400 billion,tax revenues are $500 billion,exports are $300 billion,and imports are $200 billion.The government budget ________ the supply of loanable funds,which ________ the real interest rate and ________ investment.

Accepted Answer

The government budget surplus increases when tax revenues exceed government spending. In this case, tax revenues are $500 billion and there is no information provided about government spending, so we can assume there is a surplus. A government budget surplus increases the supply of loanable funds because the government is saving more than it is spending, which means there is more money available to lend. An increase in the supply of loanable funds lowers the real interest rate because there is less competition for loans. Finally, a lower real interest rate increases investment because it makes borrowing cheaper and more attractive to investors.

Question 5

Suppose that in China,investment is $400 billion,saving is $400 billion,tax revenues are $500 billion,exports are $300 billion,and imports are $200 billion.________ in government expenditure or ________ in taxes will further increase China's budget ________,increase investment and speed economic growth.

Accepted Answer

The answer of Suppose that in China,investment is $400 billion,saving...

Question 6

Norland has the budget deficit of $15 billion.According to the government economists,Norland has a structural deficit of $3 billion.What is a cyclical deficit in Norland?

Accepted Answer

The cyclical deficit is the difference between the actual budget deficit and the structural deficit. 
Cyclical deficit = Actual budget deficit - Structural deficit 
Cyclical deficit = $15 billion - $3 billion 
Cyclical deficit = $12 billion. Therefore, the correct answer is D), $12 billion.

Question 7

Currently the government of Ricardia has outlays equal to $100 billion,and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1(real GDP).What is the real GDP when the government has a balanced budget?

Accepted Answer

A balanced budget occurs when government outlays are equal to taxes. 
Let's set Taxes equal to $100 billion and solve for real GDP:
$100 billion = $25 billion + 0.1(real GDP)
$75 billion = 0.1(real GDP)
real GDP = $750 billion. 
Therefore, the answer is (D) $750 billion.

Question 8

A cyclical deficit occurs when

Accepted Answer

A cyclical deficit occurs when there is a deficit due to the fact that real GDP is less than potential GDP. This is because during an economic downturn, tax revenues decrease while government spending on transfer payments such as unemployment benefits increase. As a result, the government experiences a deficit even if its spending and revenue levels were balanced during a period of normal economic growth.

Question 9

The government is proposing to increase the tax rate on labour income and asks you to report on the supply-side effects of such an action.According to the research of Edward C.Prescott,cross-country evidence for Canada,the United States,the United Kingdom,and France shows all of the following except ________.

Accepted Answer

The answer of The government is proposing to increase the...

Question 10

Currently the government of Ricardia has outlays equal to $100 billion,and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1(real GDP).What are autonomous taxes in Ricardia?

Accepted Answer

The answer of Currently the government of Ricardia has outlays...

Question 11

If the economy is in a recession,and the government has a budget deficit,then there

Accepted Answer

The answer of If the economy is in a recession,and...

Question 12

A tax on labour income ________.

Accepted Answer

The answer of A tax on labour income ________.
...

Question 13

The cyclical deficit

Accepted Answer

The cyclical deficit arises because real GDP does not equal potential GDP, meaning that during economic downturns, tax revenues decrease and government spending on unemployment benefits and other safety net programs increases, leading to a temporary deficit. It is not a persistent economic phenomenon or an accumulation of government debt, and it can occur even when the economy is not at full employment.

Question 14

If the economy is in a recession and the federal government is running a deficit,then an expansion would

Accepted Answer

The answer of If the economy is in a recession...

Question 15

Consider the economy of NoTax,where the multiplier is 2.5.If the government desires to shift the AD curve rightward by $5 billion,the correct increase in government expenditure is

Accepted Answer

The government expenditure multiplier is 2.5, meaning that every dollar of government spending increases aggregate demand by 2.5 dollars. To shift the AD curve by $5 billion, the government should increase spending by $5 billion / 2.5 = $2 billion.

Question 16

The government increases the tax rate on labour income.At the equilibrium level of employment,the before-tax wage rate ________ and the after-tax wage rate ________.Potential GDP ________.

Accepted Answer

The government increases the tax rate on labour income. At the equilibrium level of employment, the before-tax wage rate rises and the after-tax wage rate falls. Potential GDP does not change.

Question 17

Everything else remaining the same,as the economy enters a recession,

Accepted Answer

During a recession, there is likely to be an increase in government spending on social welfare programs due to the increase in unemployment and poverty. Additionally, tax revenues are likely to fall because of the decrease in economic activity and resulting decrease in taxable income. Therefore, government outlays tend to rise while tax revenues fall.

Question 18

The government increases the tax rate on labour income.As a result,the supply of labour ________ and the demand for labour ________.The equilibrium level of employment ________.

Accepted Answer

The answer of The government increases the tax rate on...

Question 19

The structural deficit is the deficit

Accepted Answer

The structural deficit refers to the deficit that would occur at potential GDP, meaning it is not affected by the business cycle (recession or expansion) or the trough of the business cycle.

Question 20

The government increases the tax rate on labour income and at the same time cuts the rate of sales tax to keep the amount of tax collected constant.As a result,the supply of labour ________,the demand for labour ________,and the equilibrium level of employment ________.The before-tax wage rate ________,and the after-tax wage rate ________.Potential GDP ________.

Accepted Answer

The answer of The government increases the tax rate on...

Quiz 29: Fiscal Policy

Everything else remaining the same,as the economy enters an expansion,

A tax on interest income ________.

If the economy is in an expansion,and the federal government is running a deficit,then a recession would automatically

Suppose that in China,investment is $400 billion,saving is $400 billion,tax revenues are $500 billion,exports are $300 billion,and imports are $200 billion.The government budget the supply of loanable funds,which the real interest rate and investment.

Suppose that in China,investment is $400 billion,saving is $400 billion,tax revenues are $500 billion,exports are $300 billion,and imports are $200 billion. in government expenditure or in taxes will further increase China's budget ,increase investment and speed economic growth.

Norland has the budget deficit of $15 billion.According to the government economists,Norland has a structural deficit of $3 billion.What is a cyclical deficit in Norland?

Currently the government of Ricardia has outlays equal to $100 billion,and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1(real GDP) .What is the real GDP when the government has a balanced budget?