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| 1 | |
______ policy is government policy on spending and taxes. |
| | A) | fiscal |
| | B) | financial |
| | C) | monetary |
| | D) | social |
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| 2 | |
Stabilization policy is government action to keep _____ close to ______________. |
| | A) | taxes, expenditure |
| | B) | output, potential output |
| | C) | consumption, income |
| | D) | imports, exports |
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| 3 | |
The budget deficit is the excess of government ________ over government ________. |
| | A) | receipts, spending |
| | B) | job vacancies, employees |
| | C) | spending, receipts |
| | D) | imports, exports |
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| 4 | |
When aggregate demand and equilibrium output are below potential output, _______ or ____________________ will raise aggregate demand and equilibrium output. |
| | A) | higher tax rates, lower transfer benefits |
| | B) | higher tax rates, higher transfer benefits |
| | C) | lower tax rates, lower transfer benefits |
| | D) | lower tax rates, higher transfer benefits |
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| 5 | |
With a marginal propensity to consume of 0.9, the multiplier is 1 / (1- MPC) = ? |
| | A) | 10
9
1/9
0.9 |
| | B) | 10
9
1/9
0.9 |
| | C) | 1/9 |
| | D) | 0.9 |
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| 6 | |
The budget surplus or deficit is determined by three things: the tax rate, the level of government spending , and the level of output. |
| | A) | True |
| | B) | False |
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| 7 | |
The __________ shows what the budget would be if output is at potential output. |
| | A) | budget deficit |
| | B) | structural budget |
| | C) | fiscal stance |
| | D) | borrowing requirement |
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| 8 | |
When some tax and benefits automatically stimulate the economy in recession and dampen spending during inflation they can be regarded as_______ . |
| | A) | Latent stabilizers |
| | B) | Policy stabilizers |
| | C) | Automatic stabilizers |
| | D) | Cyclical stabilizers |
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| 9 | |
Aggregate demand without a foreign sector is the sum of: |
| | A) | C + I |
| | B) | C + G |
| | C) | I + G |
| | D) | C + I + G |
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| 10 | |
If the government increases spending and raises taxes by just enough to finance this increase it will: |
| | A) | leave output unchanged. |
| | B) | increase output. |
| | C) | reduce output. |
| | D) | increase the MPC. |
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| 11 | |
Starting from a balanced budget, for a given tax rate, an increase in income will cause the government budget to |
| | A) | move into surplus |
| | B) | move into deficit |
| | C) | remain unchanged |
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| 12 | |
For given government spending and taxation, the government budget deficit will grow in __________ and decline in ___________. |
| | A) | booms, booms |
| | B) | recession, recession |
| | C) | booms, recessions |
| | D) | recessions, booms |
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| 13 | |
The government budget is a good indicator of fiscal stance. |
| | A) | True |
| | B) | False |
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| 14 | |
Aggregate demand in an economy trading internationally with a government sector can be written as _______________. |
| | A) | AD = C + I |
| | B) | AD = C + I + G |
| | C) | AD = C + I + G + X + Z |
| | D) | AD = C + I + G + X – Z |
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| 15 | |
The total multiplier for the economy will reflect _________. |
| | A) | MPC and MPT |
| | B) | MPT and MPZ |
| | C) | MPC and MPZ |
| | D) | MPC, MPT and MPZ |
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| 16 | |
When the level of income _________ there will be a tendency for the trade balance to improve as imports __________ . |
| | A) | increases, increase |
| | B) | falls, increase |
| | C) | falls, fall |
| | D) | increase, fall |
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| 17 | |
When an open economy is in equilibrium it means that the trade deficit is zero. |
| | A) | True |
| | B) | False |
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| 18 | |
In an open economy leakages to imports ___________ the value of the multiplier. |
| | A) | reduce |
| | B) | increase |
| | C) | do not change |
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| 19 | |
Higher export demand _____________ output and a higher MPZ __________ output. |
| | A) | reduces, reduces |
| | B) | reduces, increases |
| | C) | increases, reduces |
| | D) | increases, increases |
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| 20 | |
In equilibrium, any surplus desired by the private sector must be offset by deficits in either the _________ or the ___________ (or both). |
| | A) | company sector, commercial sector |
| | B) | government sector, company sector |
| | C) | commercial sector, government sector |
| | D) | government sector, foreign trade sector |
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