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1.If the multiplier for government spending is 1.60 and government spending is increased by $160
billion, calculate the amount by which the demand curve will ultimately shift.
Shift of the demand curve =
billion. (Enter your response as an integer and include a minus sign if necessary.)
2. Debit Cards as a Fiscal Stimulus. Here is one unusual fiscal policy: The government would issue time-dated debit cards to each person that had to be spent on goods and services produced only by U.S. firms within a fixed period (say, three months) or become worthless. Suppose the government was considering whether to issue $400 in time-dated debit cards to each household or give each household $400 in cash instead.
Suppose a family had large credit card debt, which it wished to reduce. Of the two plans, the family would prefer
the cash payments program, since cash could be used to pay off some of the credit card debt.
the debit card program, since they did not need to use cash to buy goods and services.
neither, since the credit card was fixed and was dependent on the interest rate.
both of them equally, since they involved payments of equal size.
3. Looking Backwards. Some critics of stabilization policy say that policymakers are always looking
backwards long dash through a rear view mirror at past data long dash and
thus cannot conduct stabilization policy.
Which of the following is a defense for policymakers?
Recently, the recognition of lags in data collection has eliminated the use of stabilization policies.
Economic forecasts using past data are better than forecasts using current data.
Sometimes economic conditions require that stabilization policies be enacted by relying on the best available data.
Recently, analysts have found that future trends usually follow past data.
4. The largest component of federal spending is
5. Which of the following is an entitlement program?
Corporate income taxes
Government investment spending
Personal consumption expenditure
6. Automatic Stabilizers and Fluctuations in Output. Because of automatic stabilizers, the states that have a more generous unemployment insurance program experience
fluctuations in output.
7. Annual government spending not stipulated by existing laws is called
8. Based on the Laffer’s theory why do lower tax rates increase government revenue?
Companies will hire fewer workers when taxes are lower.
Workers will be willing to work less when taxes are lower.
Workers will think it is unfair when the government taxes them less.
When workers get to keep more of their salary, they will work harder thus increasing the tax base
9. Long-run average income is known as
10. What was the effect on the economy from the Kennedy and Johnson tax cuts?
Real GDP and consumption grew at rates of 4% each year between 1963 and 1966.
Real GDP and consumption were unchanged from what they would have been.
Real GDP and consumption declined each year between 1963 and 1966.
Real GDP and consumption were unchanged entirely.
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