Quiz: Macroeconomics Exam! MCQ Trivia

40 Questions | Total Attempts: 383

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Quiz: Macroeconomics Exam! MCQ Trivia - Quiz

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Questions and Answers
  • 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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