Question 1

Government tax revenues ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Accepted Answer

During an expansion, tax revenues typically increase due to increased economic activity and higher employment rates. During a recession, tax revenues typically decrease due to decreased economic activity and higher unemployment rates. This can lead to larger budget deficits during the expansion phase of the business cycle, as the government may continue to spend at high levels while revenue slows. Therefore, choice E (increase; decrease; expansion) is the best answer.

Question 2

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions.What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Accepted Answer

The answer of Depending on the relative size of the...

Question 3

Need-based spending ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Accepted Answer

Need-based spending decreases during an expansion as people have more disposable income and feel less worried about meeting their basic needs. Conversely, need-based spending increases during a recession as people become unemployed or underemployed and struggle to make ends meet. These changing spending patterns often lead to larger budget deficits during the recession phase of the business cycle, as government expenses increase to support those who are struggling.

Question 4

$$\begin{array} { c c c } 
& \begin{array} { c } 
\text { Government } \
\text { outlays } \
\text { (trillions of }
\end{array} & \begin{array} { c } 
\text { Tax revenues } \
\text { (trillions of }
\end{array} \
\text { Year } & \text { 2005 dollars) } & \text { 2005 dollars) } \
\hline 2005 & 0.75 & 0.80 \
2006 & 0.80 & 0.83 \
2007 & 0.87 & 0.86 \
2008 & 0.95 & 0.95 \
2009 & 1.06 & 1.02 \
\hline
\end{array}$$
-The above table gives a country's government outlays and tax revenue for 2005 through 2009.During which years did the country have a balanced budget, budget surplus, and budget deficit?

Accepted Answer

The answer of \[\begin{array} { c c c } 
&...

Question 5

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2010.

Accepted Answer

The answer of Discuss the federal budget history of the...

Question 6

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

Accepted Answer

The answer of When government outlays exceed tax revenues, does...

Question 7

Do automatic fiscal stabilizers eliminate business cycles?

Accepted Answer

Automatic fiscal stabilizers can help moderate business cycles, but they cannot completely eliminate them. While they may not be able to prevent business cycles that are the result of unanticipated changes, they can help to lessen the severity of the fluctuations. Therefore, the best choice is C, as it acknowledges the moderating impact of automatic fiscal stabilizers on business cycles.

Question 8

The figure above shows a labor market with an income tax.
-In the figure above, the tax wedge is equal ________ per hour, the after-tax real wage rate is equal to ________, and the before-tax real wage rate is equal to ________.

Accepted Answer

The answer of  
The figure above shows a labor...

Question 9

When the economy is in a recession, ________ taxes decrease while ________ spending increases and, as a result of this automatic fiscal policy, aggregate demand ________.

Accepted Answer

The answer of When the economy is in a recession,...

Question 10

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

Accepted Answer

The answer of A country reports that its government outlays...

Question 11

Assume the federal government raises taxes (a contractionary fiscal policy). If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________.

Accepted Answer

When the federal government raises taxes, it decreases disposable income of households and therefore reduces consumer spending. As a result, both the AS and AD curves shift to the left, causing a decrease in real GDP. However, because both the AS and AD curves shift equally, the price level will be unchanged. Therefore, the correct answer is D, which states that real GDP will decrease and the price level will be unchanged.

Question 12

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect?
 Define the balanced budget multiplier and then explain your answer.

Accepted Answer

The answer of "As long as supply-side effects are ignored,...

Question 13

President Reagan often stated he preferred supply side policies.Which of the following federal government policies would be considered supply side?
i. decrease the quantity of money
ii. lower taxes
iii. lower the interest rate.

Accepted Answer

Lowering taxes is a supply side policy since it aims to stimulate economic growth by increasing investment, production, and employment. Decreasing the quantity of money (i) is a monetary policy that aims to control inflation by reducing the amount of money in circulation. Lowering the interest rate (iii) is a monetary policy that aims to encourage borrowing and spending to stimulate aggregate demand. Neither of these policies directly targets the supply side of the economy.

Question 14

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

Accepted Answer

The answer of "The federal budget is required by law...

Question 15

The figure above shows a labor market with an income tax.
-In tax wedge in the figure above is equal to ________ per hour, which creates an after-tax real wage rate of ________ per hour and employment of ________ billion hours per year.

Accepted Answer

The answer of  
The figure above shows a labor...

Question 16

The figure above shows a labor market with an income tax.
-According to the figure above, if there is no income tax, the equilibrium real wage rate is ________ and the equilibrium hours of labor are ________.

Accepted Answer

The answer of  
The figure above shows a labor...

Question 17

Compare the views of Keynesian and mainstream economists on the effects fiscal stimulus has on real GDP and employment.

Accepted Answer

The answer of Compare the views of Keynesian and mainstream...

Question 18

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier?
 Explain your answer.

Accepted Answer

The answer of Ignoring any supply-side effects, how does the...

Question 19

The figure above shows an economy aggregate demand curve and aggregate supply curves.
-Suppose the shift from AD₀ to AD₁ and from AS₀ to AS₁ is the result of fiscal policy.If the effect on aggregate supply was larger than the figure above shows, as a result the price level would be ________ 110 and real GDP would be ________ $14 trillion.

Accepted Answer

If the aggregate supply curve shifts more than what is shown in the figure, then the price level would be lower than 110 (smaller than) because the shift in AS would result in increased output and decreased prices. Real GDP would be larger than $14 trillion because the increase in AS results in an increase in output. Therefore, the correct answer is C - smaller than 110 and larger than $14 trillion.

Question 20

The figure above shows an economy aggregate demand curve and aggregate supply curves.
-Suppose the shift from AD₀ to AD₁ and from AS₀ to AS₁ is the result of fiscal policy.If the effect on aggregate demand was larger than the figure above shows, as a result the price level would be ________ 110 and real GDP would be ________ $14 trillion.

Accepted Answer

If the effect on aggregate demand was larger than shown in the figure, then the new intersection point of AD1 and AS1 would be located further to the right (higher GDP) and higher up (higher price level) than the current point. Therefore, the price level would be higher than 110, and real GDP would be larger than $14 trillion. Choice B is the only option that reflects this outcome.

Quiz 16: Fiscal Policy

Government tax revenues during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions.What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Need-based spending during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2010.

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

Do automatic fiscal stabilizers eliminate business cycles?

The figure above shows a labor market with an income tax. -In the figure above, the tax wedge is equal per hour, the after-tax real wage rate is equal to , and the before-tax real wage rate is equal to .

When the economy is in a recession, taxes decrease while spending increases and, as a result of this automatic fiscal policy, aggregate demand .

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will and the price level will .

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect? Define the balanced budget multiplier and then explain your answer.

President Reagan often stated he preferred supply side policies.Which of the following federal government policies would be considered supply side? i. decrease the quantity of money ii. lower taxes iii. lower the interest rate.

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

The figure above shows a labor market with an income tax. -In tax wedge in the figure above is equal to per hour, which creates an after-tax real wage rate of per hour and employment of billion hours per year.

The figure above shows a labor market with an income tax. -According to the figure above, if there is no income tax, the equilibrium real wage rate is and the equilibrium hours of labor are .

Compare the views of Keynesian and mainstream economists on the effects fiscal stimulus has on real GDP and employment.

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier? Explain your answer.

Quiz 16: Fiscal Policy

Government tax revenues ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions.What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Need-based spending ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2010.

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

Do automatic fiscal stabilizers eliminate business cycles?

The figure above shows a labor market with an income tax. -In the figure above, the tax wedge is equal ________ per hour, the after-tax real wage rate is equal to ________, and the before-tax real wage rate is equal to ________.

When the economy is in a recession, ________ taxes decrease while ________ spending increases and, as a result of this automatic fiscal policy, aggregate demand ________.

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________.

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect? Define the balanced budget multiplier and then explain your answer.

President Reagan often stated he preferred supply side policies.Which of the following federal government policies would be considered supply side? i. decrease the quantity of money ii. lower taxes iii. lower the interest rate.

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

The figure above shows a labor market with an income tax. -In tax wedge in the figure above is equal to ________ per hour, which creates an after-tax real wage rate of ________ per hour and employment of ________ billion hours per year.

The figure above shows a labor market with an income tax. -According to the figure above, if there is no income tax, the equilibrium real wage rate is ________ and the equilibrium hours of labor are ________.

Compare the views of Keynesian and mainstream economists on the effects fiscal stimulus has on real GDP and employment.

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier? Explain your answer.

Government tax revenues during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.

Need-based spending during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.

The figure above shows a labor market with an income tax. -In the figure above, the tax wedge is equal per hour, the after-tax real wage rate is equal to , and the before-tax real wage rate is equal to .

When the economy is in a recession, taxes decrease while spending increases and, as a result of this automatic fiscal policy, aggregate demand .

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will and the price level will .

The figure above shows a labor market with an income tax. -In tax wedge in the figure above is equal to per hour, which creates an after-tax real wage rate of per hour and employment of billion hours per year.

The figure above shows a labor market with an income tax. -According to the figure above, if there is no income tax, the equilibrium real wage rate is and the equilibrium hours of labor are .