ECON 120 -ESSENTIALS OF ECONOMICS

Transcription

1 Name ECON 120 -ESSENTIALS OF ECONOMICS CH 24 THE GOVERNMENT AND FISCAL POLICY MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Fiscal policy refers to 1) A) the government's ability to regulate a firm's behavior in the financial markets. B) the spending and taxing policies used by the government to influence the economy. C) the techniques used by a business firm to reduce its tax liability. D) the behavior of the nation's central bank, the Federal Reserve, regarding the nation's money supply. 2) During recessions, government spending usually 2) A) increases because unemployment payments decrease. B) decreases because unemployment payments decrease. C) decrease because unemployment payments increase. D) increases because unemployment payments increase. 3) Bill's income is $1,000 and his net taxes are $350. His disposable income is 3) A) $1,350. B) $750. C) $650. D) -$350. 4) When the government sector is included in the income-expenditure model, the equation for aggregate income is A) Y = C + I + G. B) Y = C + S + I. C) Y = C + I. D) Y = C + S - T. 4) 5) In 2012, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2012, the city of Canfield had a A) budget surplus of $50,000. B) budget surplus of $450,000. C) budget deficit of $50,000. D) budget surplus of $5,000. 5) 6) The aggregate consumption function is C = + 0.6Yd. If income is $1,000 and net taxes are $300, consumption equals A) 800. B) 700. C) 580. D) ) Refer to the information provided in Table 24.1 below to answer the questions that follow. Output (Income) , 1,600 2,000 Consumption ,000 1,300 1,600 Table 24.1 All Numbers are in $ Billion Net Investment Taxes Government 7) Refer to Table At an output level of $1, billion, the level of aggregate expenditure is 7) A) $1,000 billion. B) $1, billion. C) $1,300 billion. D) $1,400 billion. 1

2 8) Refer to Table At an output level of $1, billion, there is an unplanned inventory change of 8) A) positive $ billion. B) zero. C) negative $ billion. D) positive $10 billion. 9) Refer to Table At an output level of $2,000 billion, the level of aggregate expenditure is 9) A) $1,500 billion. B) $1,800 billion. C) $1,900 billion. D) $2,000 billion. 10) Refer to Table The equilibrium level of output is billion. 10) A) $800 B) $1, C) $1,600 D) $2,000 11) Refer to Table At an output level of $800 billion, disposable income equals billion. 11) A) $800 B) $700 C) $600 D) $500 12) Refer to Table At an output level of $2,000 billion, the value of saving 12) A) cannot be determined from the given information. B) is $300 billion. C) is $ billion. D) is $ billion. Refer to the information provided in Figure 24.1 below to answer the questions that follow. Figure ) Refer to Figure The equilibrium level of aggregate expenditure is $ billion. 13) A) 4,000 B) 3,000 C) 2,000 D) 1,500 14) Refer to Figure The MPC in this economy is 14) A) 0.4. B) 0.5. C) 0.6. D) cannot be determined from the given information 15) For the economy to be in equilibrium, 15) A) government purchases must equal the sum of tax revenue, saving and investment. B) government purchases plus investment must equal saving plus tax revenue. C) investment plus tax revenue must equal government purchases plus saving. D) government purchases must equal tax revenue and saving must equal investment. 2

3 16) If the government wants to reduce unemployment, government purchases should be and/or taxes should be. A) increased; increased B) decreased; increased C) decreased; decreased D) increased; decreased 16) 17) If the MPC is 0.75, the government spending multiplier is 17) A) 4. B) 3. C) 2.5. D) ) The government purchases multiplier is 18) A) the difference between the old equilibrium level of output and the new equilibrium level of output. B) the difference between the new and old levels of government purchases. C) the ratio of the change in the equilibrium level of output to a change in government purchases. D) the ratio of the change in government purchases to the change in the equilibrium level of output. 19) If the government spending multiplier is 2 and government purchases increase by $ billion, output will increase by A) $ billion. B) $400 billion. C) $500 billion. D) $1,600 billion. 19) Refer to the information provided in Figure 24.3 below to answer the questions that follow. Figure ) Refer to Figure At equilibrium, autonomous planned expenditures equal $ billion. 20) A) B) C) 300 D) 500 3

4 Refer to the information provided in Table 24.4 below to answer the questions that follow. Output (Income) 2,400 2,800 3,000 3, 3,400 3,600 3,800 Net Taxes Table 24.4 All Figures in Billions of Dollars Consumption (C = +.9Yd) Savings 2,170 2,530 2,710 2,890 3,070 3,250 3, Planned Investment Purchases Government 21) Refer to Table The equilibrium level of income is 21) A) $3,800 billion. B) $3,600 billion. C) $3,400 billion. D) $2,000 billion. 22) Refer to Table The value of the government spending multiplier 22) A) is 10. B) is 5. C) is 0.9. D) cannot be determined from the available information. 23) Refer to Table The economy is at the equilibrium level of output. If government spending increases to a level of $400 billion, the new equilibrium level of output is A) $2, billion. B) $5,400 billion. C) $6,040 billion. D) $6,600 billion. 23) 4

5 Answer Key Testname: EXERCISES CH 24 1) B 2) D 3) C 4) A 5) A 6) D 7) C 8) C 9) C 10) C 11) B 12) B 13) C 14) B 15) B 16) D 17) A 18) C 19) B 20) C 21) C 22) A 23) B 5