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Chapter 13 - Fiscal Policy, Deficits, and Debt
50. In the above diagram it is assumed that investment, net exports, and government
purchases:
51. Refer to the above diagram. The equilibrium level of GDP is:
Chapter 13 - Fiscal Policy, Deficits, and Debt
52. Refer to the above diagram. If the full-employment GDP is Y5, government should:
53. Refer to the above diagram. If the full-employment GDP is Y3, government should:
54. Built-in stability means that:
Chapter 13 - Fiscal Policy, Deficits, and Debt
55. If Congress adjusted the U.S. tax system so that the MPC was reduced, the
56. A major advantage of the built-in or automatic stabilizers is that they:
57. Which of the following best describes the built-in stabilizers as they function in the United
States?
Chapter 13 - Fiscal Policy, Deficits, and Debt
58. Which of the following statements is correct?
59. Refer to the above diagram in which T is tax revenues and G is government expenditures.
All figures are in billions. This diagram portrays the idea of:
Chapter 13 - Fiscal Policy, Deficits, and Debt
60. Refer to the above diagram in which T is tax revenues and G is government expenditures.
All figures are in billions. The equilibrium level of GDP in this economy:
61. Refer to the above diagram in which T is tax revenues and G is government expenditures.
All figures are in billions. If GDP is $400:
62. Refer to the above diagram in which T is tax revenues and G is government expenditures.
All figures are in billions. The budget will entail a deficit:
Chapter 13 - Fiscal Policy, Deficits, and Debt
63. Refer to the above diagram in which T is tax revenues and G is government expenditures.
All figures are in billions. In this economy:
64. Refer to the above diagram. Which tax system has the most built-in stability?
Chapter 13 - Fiscal Policy, Deficits, and Debt
13-27
65. Refer to the above diagram. Which tax system has the least built-in stability?
66. Refer to the above diagram. Which tax system will generate the largest cyclical deficits?
Chapter 13 - Fiscal Policy, Deficits, and Debt
67. (Advanced analysis) Refer to the above diagram, in which C3 is the before-tax
consumption schedule. The after-tax consumption schedule represented by C2 reflects:
68. (Advanced analysis) Refer to the above diagram, in which C1 is the before-tax
consumption schedule. The consumption schedule represented by C3 reflects:
69. (Advanced analysis) Refer to the above diagram, in which C1 is the before-tax
consumption schedule. The consumption schedule represented by C4 reflects:
Chapter 13 - Fiscal Policy, Deficits, and Debt
13-29
70. (Advanced analysis) Refer to the above diagram, in which C1 is the before-tax
consumption schedule. Other things being equal, the economy would enjoy the greatest built-
in stability with consumption schedule:
Answer the question on the basis of the following before-tax consumption schedule for a
closed economy:
Chapter 13 - Fiscal Policy, Deficits, and Debt
71. Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of
$40 is now imposed in this economy, the consumption schedule will be:
Chapter 13 - Fiscal Policy, Deficits, and Debt
72. Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of
$40 is imposed in this economy, the tax system:
73. Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of
$40 is imposed in this economy, the marginal propensity to consume is:
74. Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of
$40 is imposed in this economy, we can conclude that the tax:
Chapter 13 - Fiscal Policy, Deficits, and Debt
13-32
(Advanced analysis) Answer the question on the basis of the following before-tax
consumption schedule for an economy:
Chapter 13 - Fiscal Policy, Deficits, and Debt
75. Refer to the above data. If a 10 percent proportional tax on income is imposed, the
consumption schedule will now be:
Chapter 13 - Fiscal Policy, Deficits, and Debt
76. Refer to the above data. The 10 percent proportional tax on income would cause:
77. Refer to the above data. A 10 percent proportional tax on income would:
78. The cyclically-adjusted budget refers to:
Chapter 13 - Fiscal Policy, Deficits, and Debt
79. The cyclically-adjusted budget tells us:
80. Which of the following statements is correct?
81. If the economy has a cyclically-adjusted budget surplus, this means that:
Chapter 13 - Fiscal Policy, Deficits, and Debt
82. The actual budget deficit of the Federal government in 2009 was about $1.4 trillion. On
the basis of this information it:
83. When current government expenditures equal current tax revenues and the economy is
achieving full employment:
84. When current government expenditures exceed current tax revenues and the economy is
achieving full employment:
Chapter 13 - Fiscal Policy, Deficits, and Debt
85. When current tax revenues exceed current government expenditures and the economy is
achieving full employment:
86. Suppose the government purposely changes the economy's cyclically-adjusted budget
from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government
is engaging in a(n):
87. Suppose the government purposely changes the economy's cyclically-adjusted budget
from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP. The government
is engaging in a(n):
Chapter 13 - Fiscal Policy, Deficits, and Debt
88. Suppose the government cuts taxes to keep the economy's cyclically-adjusted budget in
balance when the economy is expanding. The government is engaging in a(n):
89. Refer to the above data for a fictional economy. The changes in the budget conditions
between 1998 and 1999 best reflect:
Chapter 13 - Fiscal Policy, Deficits, and Debt
90. Refer to the above data for a fictional economy. The changes in the budget conditions
between 1999 and 2000 best reflect:
91. Refer to the above table for a fictional economy. The changes in the budget conditions
between 2000 and 2001 best reflect:
92. Refer to the above table for a fictional economy. The changes in the budget conditions
between 2001 and 2002 best reflect a(n):
Chapter 13 - Fiscal Policy, Deficits, and Debt
93. Refer to the above diagram. Assume that G and T1 are the relevant curves and that the
economy is currently at B, which is its full-employment GDP. This economy has a:
