Question :
11) Which of the following would increase the size of : 1244877
11) Which of the following would increase the size of the government purchases multiplier?
A) an increase in the tax rate
B) an increase in the quantity of imports purchased by households from an increase in income
C) a decrease in the amount of consumption spending by households from an increase in income
D) a decrease in the amount saved by households from an increase in income
12) If the tax multiplier is -1.5 and a $200 billion tax increase is implemented, what is the change in GDP, holding everything else constant? (Assume the price level stays constant.)
A) a $300 billion decrease in GDP
B) a $300 billion increase in GDP
C) a $30 billion increase in GDP
D) a $133.33 billion decrease in GDP
E) a $133.33 billion increase in GDP
13) Suppose the government spending multiplier is 2. The federal government cuts spending by $40 billion. What is the change in GDP if the price level is not held constant?
A) an increase of less than $80 billion
B) an increase equal to $80 billion
C) an increase of greater than $80 billion
D) a decrease of less than $80 billion
E) a decrease of more than $80 billion
14) The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the
A) decrease in taxes will be saved by households and not spent, and some portion will be spent on imported goods.
B) decrease in taxes will be saved by households and not spent, and some portion will be spent on consumer durable goods.
C) increase in government purchases will be saved by households and not spent, and some portion will be spent on imported goods.
D) increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.
15) A decrease in the tax rate will ________ the disposable income of households and ________ the size of the multiplier effect.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
E) increase; not change
16) Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced. What will happen to real equilibrium GDP?
A) Real equilibrium GDP will fall.
B) Real equilibrium GDP will rise.
C) There will be no change in real equilibrium GDP.
D) Real equilibrium GDP will initially rise, but then fall below its previous equilibrium value.
17) Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the economy back to potential GDP, Congress should
A) lower government purchases by an amount less than $200 billion.
B) lower government purchases by $200 billion.
C) raise taxes by $200 billion.
D) lower taxes by $200 billion.
E) raise taxes by an amount more than $200 billion.
18) Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion. To move the economy back to potential GDP, Congress should
A) lower taxes by an amount less than $500 billion.
B) raise government purchases by $500 billion.
C) raise government purchases by more than $500 billion.
D) lower taxes by $500 billion.
E) lower government purchases by $500 billion.
19) The multiplier effect is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.
A) induced; investment; autonomous
B) induced; consumption; autonomous
C) autonomous; consumption; induced
D) autonomous; investment; induced
20) The government purchases multiplier is defined as
A) .
B) .
C) .
D) .
