Question :
41) If the government reduces expenditure goods and services by : 1238210
41) If the government reduces expenditure on goods and services by $30 billion, then aggregate demand
A) decreases by more than $30 billion and real GDP decreases.
B) decreases by $30 billion and real GDP decreases.
C) increases by $30 billion and real GDP increases.
D) increases and potential GDP increases.
E) increases by more than $30 billion and real GDP increases.
42) The tax multiplier is the
A) magnification effect of a change in taxes on aggregate demand.
B) magnification effect of a change in taxes on the budget deficit.
C) magnification effect of a change in taxes on government expenditures.
D) magnification effect of a change in taxes on aggregate supply.
E) magnification effect of a change in taxes on the national debt.
43) The magnitude of the tax multiplier is smaller than the magnitude of the government expenditure multiplier because
A) a change in taxes does not change expenditures.
B) an increase in taxes decreases expenditures.
C) a decrease in government expenditure decreases tax revenue.
D) a change in taxes does not change expenditures by as much as the same size change in government expenditure.
E) a change in taxes creates additional induced taxes.
44) If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demand
A) increases by $100 billion.
B) increases by less than $100 billion.
C) increases by more than $100 billion.
D) decreases by $100 billion.
E) decreases by more than $100 billion.
45) If federal taxes are cut by $10 billion, aggregate demand
A) increases by $10 billion.
B) increases by $10 billion multiplied by the government expenditure multiplier.
C) increases by $10 billion multiplied by the tax multiplier.
D) decreases by $10 billion
E) decreases by $10 billion multiplied by the tax multiplier.
46) The government expenditure multiplier and the tax multiplier are
A) identical in size.
B) different in size and the tax multiplier is larger.
C) different in size and the government expenditure multiplier is larger.
D) not comparable because the government expenditure multiplier applies to aggregate demand and the tax multiplier applies to aggregate supply.
E) not comparable because the government expenditure multiplier applies to aggregate supply and the tax multiplier applies to aggregate demand.
47) Ignoring any supply-side effects, suppose the government is considering cutting taxes by $100 billion or increasing government expenditures on goods and services by $100 billion. Then
A) both policies would increase aggregate demand by the same amount.
B) both policies would increase aggregate demand but the tax cut has a smaller effect.
C) both policies would increase aggregate demand but the increase in government expenditure has a smaller effect.
D) the tax cut would decrease aggregate demand and the increase in government expenditure would increase aggregate demand.
E) the tax cut would increase aggregate demand and the increase in government expenditure would decrease aggregate demand.
48) The balanced budget multiplier is
A) positive because the magnitude of government expenditure multiplier is larger than the magnitude of tax multiplier.
B) negative because the magnitude of government expenditure multiplier is larger than the magnitude of the tax multiplier.
C) positive because the magnitude of government expenditure multiplier is smaller than the magnitude of tax multiplier.
D) equal to zero.
E) negative because the magnitude of the tax multiplier is larger than the magnitude of the government expenditure multiplier.
49) When comparing a $100 billion increase in government expenditure to a $100 billion decrease in tax revenue, the effect of the increase in government expenditure on aggregate demand is
A) greater than the effect of the tax decrease.
B) equal to the effect of the tax decrease.
C) less than the effect of the tax decrease.
D) positive whereas the effect of the tax decrease is negative.
E) negative whereas the effect of the tax decrease is positive.
50) The balanced budget multiplier is
A) equal to zero because taxes and government expenditure are changed to leave the budget balanced.
B) misnamed because it does not leave the budget balanced.
C) greater than zero and less than the government expenditure multiplier.
D) greater than zero and greater than the government expenditure multiplier.
E) less than zero, that is, it is negative.
