Multiple Choice Questions

1. When there is an increase in lump-sum taxes, the consumption function

(a) shifts upward by the increase in taxes, ceteris paribus,

(b) shifts downward by the increase in taxes, ceteris paribus,

(c) shifts upward by the MPC times the increase in taxes, ceteris paribus,

(d) shifts downward by the MPC times the increase in taxes, ceteris paribus.

2. Which of the following statements is true?

(a) An increase in lump-sum taxes increases personal disposable income, ceteris paribus.

(b) A decrease in welfare payments increases personal disposable income, ceteris paribus.

(c) An increase in social security payments increases personal disposable income, ceteris paribus.

(d) An increase in the income tax rate increases personal disposable income, ceteris paribus.

3. An increase in government spending, ceteris paribus, shifts the aggregate spending line

(a) upward by the increase in government spending,

(b) downward by the increase in government spending,

(c) upward by the increase in government spending times the expenditure multiplier,

(d) downward by the increase in government spending times the expenditure multiplier.

4. In the leakages-injection approach to income determination, an increase in lump-sum taxes, ceteris paribus, shifts

(a) the investment plus government spending line upward, (.b) the investment plus government spending line downward,

(c) the saving plus taxes line to the right,

(d) the saving plus taxes line to the left.

5. An inflationary gap can be eliminated by

(a) equal increases in net tax revenues and government spending,

(b) an increase in government spending and a decrease in lump-sum taxes,

(c) equal decreases in net tax revenues and government spending,

(d) a decrease in lump-sum taxes.

6. Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is no income tax. Full-employment output can be achieved by a $16 increase in government spending or which of the following changes in net lump-sum tax revenues?

7. Suppose the full-employment level of output is $680, the equilibrium level of output is $600, the MPC is 0.80, and there is a 0.25 income tax. Full-employment output can be achieved by a

(a) $20 increase in government spending,

(b) $25 increase in government spending,

(c) $30 increase in government spending,

(d) $32 increase in government spending.

8. Which of the following situations results in a $50 increase in the equilibrium level of output when the MPC is 0.80 and there is no income tax?

(a) A $10 increase in both net lump-sum tax revenues and in government spending,

(b) A $12.50 increase in both net lump-sum tax revenues and in government spending,

(c) A $12.50 increase in net lump-sum tax revenues and a $10 increase in government spending,

(d) A $12.50 increase in net lump-sum tax revenues and a $20 increase in government spending.

9. A discretionary fiscal action involves

(a) automatic changes in net tax revenues that result from the income tax structure,

(b) payment of unemployment insurance,

(c) a Congressionally mandated change in the level of government spending or net tax revenues,

(d) payment of social security to retired individuals.

10. Built-in stabilizers are

(a) discretionary fiscal actions available to the President,

(b) increased government spending on public works projects,

(c) a change in the income tax rate, id) changes in net tax revenues that are the result of a change in the level of economic activity.

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Responses

  • viviana
    When there is an increase in lump sun taxes and government spending, ceteris paribus, the the?
    8 years ago
  • belinda maggot
    Which changes in lump sum with changes on activity or output?
    7 years ago

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