Quiz: Macroeconomics Exam! MCQ Trivia
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- 1.Discretionary fiscal policy is
- A.
The use of interest rate changes to affect aggregate demand.
- B.
The use of interest rate changes to affect aggregate supply.
- C.
The use of government spending or tax policy to manage aggregate demand.
- D.
The use of government spending or tax policy to manage aggregate supply.
- 2.The largest categories of government purchases of goods and services are
- A.
National defense and education
- B.
Scientific research and foreign aid.
- C.
Border patrol and interstate highway maintenance.
- D.
Law enforcement and environmental protection.
- 3.When the government makes a payment to an individual for which no good or service is provided in return, this is referred to as a
- A.
Public exchange.
- B.
Private exchange.
- C.
Reverse tax.
- D.
Transfer payment.
- 4.Social Security, Medicare, and Medicaid are the three main
- A.
Tools of discretionary fiscal policy.
- B.
Social insurance programs.
- C.
Sources of aggregate demand.
- D.
Sources of disposable income.
- 5.Disposable income
- A.
Is the amount of household income collected as tax revenue.
- B.
Is the total income households have available to spend.
- C.
Is the portion of household income saved.
- D.
Is the portion of household income invested.
- 6.A recessionary gap occurs when
- A.
Aggregate output falls below potential output.
- B.
Potential output falls below aggregate output.
- C.
Transfer payments undermine incentives to work.
- D.
Taxes on corporate profits undermine incentives to invest.
- 7.To address a recessionary gap, the appropriate fiscal policy would be
- A.
An increase in personal taxes.
- B.
An increase in corporate taxes.
- C.
An increase in government spending.
- D.
An increase in interest rates.
- 8.The effect of expansionary fiscal policy is to
- A.
Shift aggregate supply to the left.
- B.
Shift aggregate supply to the right.
- C.
Shift aggregate demand to the left.
- D.
Shift aggregate demand to the right.
- 9.Which of the following is NOT an example of a contractionary fiscal policy?
- A.
Decreasing the money supply
- B.
Decreasing government spending
- C.
Decreasing transfer payments
- D.
Increasing taxes
- 10.Which of the following would shift aggregate demand to the left?
- A.
An increase in government transfer payments that affects disposable income
- B.
A decrease in taxes that affects disposable income
- C.
An increase in taxes that affects disposable income
- D.
An increase in private investment spending, funded by tax cuts
- 11.Lags that arise in the implementation of fiscal policy mean that
- A.
Expansionary fiscal policy will actually shift aggregate demand to the left, rather than to the right.
- B.
Expansionary fiscal policy will actually shift aggregate supply, rather than aggregate demand.
- C.
Increases in government spending will actually have a contractionary effect.
- D.
It can actually be destabilizing.
- 12.The expansionary fiscal policy in Japan in the 1990s has
- A.
Increased the government debt.
- B.
Caused interest rates to fall to 0%.
- C.
Shifted aggregate demand to the left.
- D.
Produced a full economic recovery.
- 13.The 2008 stimulus package was an example of
- A.
Shifting aggregate demand to the left.
- B.
Shifting short-run aggregate supply to the right.
- C.
Contractionary fiscal policy.
- D.
Expansionary fiscal policy.
- 14.The amount of the aggregate demand shift in response to an increase in government spending depends on
- A.
The slope of the short-run aggregate supply curve.
- B.
The slope of the long-run aggregate supply curve.
- C.
The size of the multiplier.
- D.
Whether the increase in government spending is supported by both political parties.
- 15.A $75 billion tax cut will
- A.
Increase GDP by the same amount as a $75 billion increase in government purchases of goods and services.
- B.
Increase GDP by a smaller amount than would a $75 billion increase in government purchases of goods and services.
- C.
Not affect aggregate demand, as it will only shift aggregate supply.
- D.
Increase the marginal propensity to consume, thereby decreasing the value of the multiplier.
- 16.Because transfer payments rise when the economy is contracting and fall when it is expanding, they are referred to as
- A.
Automatic stabilizers.
- B.
Discretionary policy measures.
- C.
Fiscal lags.
- D.
Zero-balance accounts.
- 17.Which of the following statements is true?
- A.
The presence of a budget deficit is proof that government is trying to expand aggregate demand.
- B.
Tax cuts will not boost aggregate demand unless the money is saved by consumers and then invested by businesses.
- C.
Because transfer payments typically rise during an economic recovery, they destabilize the economy.
- D.
An increase in government spending will have a greater effect on aggregate demand when the marginal propensity to consume is greater.
- 18.The government budget deficit is most likely to rise when
- A.
The interest rate falls.
- B.
The interest rate rises.
- C.
The unemployment rate rises.
- D.
The economy recovers from a recession.
- 19.A requirement to have an annually balanced federal budget would mean
- A.
That there would be no more recessionary gaps or inflationary gaps.
- B.
That the role of taxes and transfers as automatic stabilizers would be undermined.
- C.
That total household disposable income would be the same every year.
- D.
That actual GDP would equal potential GDP every year.
- 20.The implicit liabilities of the U.S. government
- A.
Cannot continually be honored as they are designed, given demographic trends.
- B.
Are a problem in the short run, but not in the long run.
- C.
Are not a cause for worry unless they lead to crowding out.
- D.
Are designed to offset an inflationary gap when it arises.
- 21.The money supply is
- A.
The total value of financial assets that can be used to purchase goods and services.
- B.
The total value of the nation's store of gold.
- C.
The total value of stock market holdings.
- D.
The annual sum of gains from trade.
- 22.Which of the following statements is FALSE?
- A.
Money plays a crucial role in generating gains from trade, because it makes indirect exchange possible.
- B.
In a barter economy, trade can only take place when there is a double coincidence of wants.
- C.
U.S. dollars are used as money only within U.S. borders.
- D.
An asset is liquid if it can easily be converted into cash.
- 23.Which of the following is NOT a role played by money?
- A.
A medium of exchange
- B.
A store of value
- C.
A unit of account
- D.
A means to increase purchasing power
- 24.Which of the following is NOT commodity money?
- A.
Cigarettes
- B.
A gold coin
- C.
A silver coin
- D.
A $5 bill in U.S. currency
- 25.The value of fiat money arises from
- A.
Its usefulness as a commodity.
- B.
Its ability to be redeemed in precious metals.
- C.
Its historical reputation as a currency that maintains its value in international markets.
- D.
Its official status as a means of exchange.
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