Download fiscal policy homework

ABSE 102
Homework
1. If the government wishes to encourage the economic activity it should:
a) reduce the budget deficit;
b) reduce taxes;
c) reduce government purchases;
d) none of the above.
2. A € 100 billion tax cut has:
a) the same effect on AD as a €100 billion increase in G;
b) a weaker effect on AD than a €100 billion increase in G;
c) a stronger effect on AD than a €100 billion increase in G;
d) no effect on AD, since it affects only the "supply side" of the economy.
3. Fiscal policy is more effective:
a) the lower is the multiplier;
b) the greater the multiplier;
c) the greater the time lag.
d) none of the above.
4. An inflationary gap:
a) occurs when AS falls;
b) would occur if total output were less then aggregate demand;
c) is the amount by which AD exceeds the potential GDP;
d) is the amount by which AE exceeds GDP
5. Which of the following statements best indicates that the government is pursuing a restrictive
fiscal policy:
a) the government budget is at a deficit;
b) the budget deficit turns into a surplus;
c) the budget surplus turns into a budget deficit;
d) none of the above.
6. The government is definitely pursuing an expansionary fiscal policy if, whatever the value of
the budget:
a) it increases its spending and reduces tax rates;
b) it increases its spending and increases tax rates;
c) it reduces its spending and reduces tax rates;
d) it reduces its spending and increases tax rates.
7. In an economy where potential GDP exceeds AE, more G would result in:
a) a smaller recessionary gap;
b) a smaller inflationary gap;
c) a larger recessionary gap;
d) a larger inflationary gap.
8. Other things being equal, when the economy enters a recession, the government budget tends
to:
a) move toward a surplus;
b) move toward a deficit;
c) remain unchanged.
9. If in a closed economy with G = 0, MPC = 0.6, and planned Investment increase by €10
million, GDP will increase by:
а) €10 million;
b) €6 million ;
c) €25 million;
d) none of the above.
10. Consider the macroeconomic data about OZ:
С
I
G
X
S
T
M
300 + 0.8 Y
700
500
900
- 200 + 0.1 Y
0.25 Y
100 + 0.15 Y
a) Find the multiplier
b) Find the taxation multiplier
c) find injections
d) find leakages
e) find equilibrium income
f) Find the increase in G, needed to raise GDP by 300.