ECON215 HW Borrowing:FISC Policy PDF

Preview

Summary

ECON215 HW Borrowing:Fiscal Policy ...

Description

1. When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? A. central bank prints more money B. increase in household savings C. decrease in borrowing by private firms D. foreign financial investors Answer: A

2. A country's economic data indicates that there has been a substantial reduction in the financial capital available to private sector firms. Which of the following most likely had the greatest influence on this economy? A. especially large and sustained household saving B. increased borrowing by private firms C. reduction in influx of funds for foreign financial investors D. especially large and sustained government borrowing Answer: D

3. If a country's economic data shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal? A. $775 million B. $475 million C. $275 million

D. $700 million Answer: C

4. If a country's economic data shows private savings of $500 million, government spending of $300 million, tax revenue of $400 million, and a trade surplus of $100 million, then what does investment equal? A. $600 million B. $500 million C. $700 million D. $900 million Answer: B

5. If a country's economic data shows private savings of $400 million, government spending of $250 million, tax revenue of $400 million, and a trade surplus of $175 million, then what does investment equal? A. $550 million B. $425 million C. $800 million D. $375 million Answer: D

6. If a country's economic data shows that private savings equal $250 million, government spending equals $400 million, taxes equal $350, and the trade surplus equals $150 million, then what does investment equal? A. $50 million B. $75 million C. $450 million D. $350 million Answer: A

7. If a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300, and the trade surplus equals $100 million, then what does investment equal? A. $150 million B. $175 million C. $200 million D. $100 million Answer: D

8. If a country's economic data shows that private savings equal $350 million, government spending equals $375 million, taxes equal $300, and the trade surplus equals $125 million, then what does investment equal? A. $50 million B. $150 million C. $425 million

D. $600 million Answer: B

9. In the national savings and investment identity framework, an inflow of savings from abroad is, by definition, equal to: A. private sector investment. B. the trade surplus. C. the trade deficit. D. domestic household savings. Answer: C

10. From a macroeconomic point of view, which of the following is a source of demand for financial capital? A. savings by households and firms B. foreign financial investment C. domestic household private savings D. government borrowing Answer: D

11. The U.S. economy has two main sources for financial capital; _______________________ and ____________________________.

A. private savings from U.S. households and firms; inflows of foreign financial investment. B. private sector investment; government borrowing C. private savings from U.S. households and firms; government borrowing D. private sector investment; inflows of foreign financial investment from abroad Answer: A

12. If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as: A. (M - X) - S = (G + T) - I B. S + (M - X) = I + (G - T) C. S + (G - T) = I - (X - M) D. S = (X - M) - (G - T) Answer: B

13. When a government records a budget surplus, the national savings and investment identity is written as: A. S = I + (G - T) + (X - M) B. S + (M - X) + (T - G) = I C. S - (G - T) = I - (X - M) D. S + (T - G) = 1 + (X - M) Answer: B

14. When a government records a trade surplus, the national savings and investment identity is written as: A. S = (G - T) + (X - M) - I B. S - (G - T) = I - (X - M) C. S = I + (G - T) + (X - M) D. S + (G - T) = I - (X - M) Answer: C

15. A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy? A. trade surplus B. trade deficit C. fiscal deficit D. twin surplus Answer: A

16. A prolonged period of budget deficits may lead to ___________________. A. outflows of financial capital abroad B. lower inflation C. lower economic growth

D. increasing exchange rates Answer: C

17. A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country’s banking and financial system. A. prolonged period of trade surpluses B. sustained pattern of large trade deficits C. prolonged period of budget surpluses D. sustained pattern of large budget deficits Answer: D

18. Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? A. high inflation B. substantial inflows of foreign financial capital C. increasing exchange rates D. strains on a country's financial system Answer: C

19. An increase in government borrowing can:

A. allow private investment to expand. B. crowd out private investment in physical capital. C. increase the incentive to invest in technology. D. cause a substantial decrease in interest rates. Answer: B

20. A reduction in government borrowing can: A. decrease the incentive to invest. B. increase the interest rate. C. crowd out private investment in human capital. D. give private investment an opportunity to expand. Answer: D

21. When the interest rate in an economy increases, it is likely the result of either: A. a decrease in the government's budget surplus or an increase in its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. an increase in the government budget surplus or its budget deficit. Answer: A

22. When the interest rate in an economy decreases, it is most likely as a result of: A. an increase in the government budget surplus or its budget deficit. B. a decrease in the government budget surplus or its budget deficit. C. an increase in the government budget surplus or a decrease in its budget deficit. D. a decrease in the government budget surplus or an increase in its budget deficit. Answer: C

23. An increase in the government’s budget surplus will cause the interest rate to: A. either increase or decrease. B. remain the same. C. increase. D. decrease. Answer: D

24. A decrease in the government’s budget surplus will cause the interest rate to: A. decrease. B. increase. C. either increase or decrease. D. remain the same.

Answer: B

25. If the government initiates an expansionary monetary policy at the same time that its budget deficit decreases, then the interest rate will ______________________. A. increase B. either increase or decrease C. decrease D. remain unchanged Answer: C

26. If the government initiates an expansionary monetary policy at the same time that its budget deficit increases, then the interest rate will __________________. A. remain unchanged B. either increase or decrease C. increase D. decrease Answer: B

27. A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. A. deficit decrease

B. smaller trade surplus C. larger trade surplus D. higher interest rate Answer: D

28. If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with: A. B. C. D.

a contractionary monetary policy. an expansionary monetary policy. a discretionary monetary policy. a loose monetary policy.

Answer: A 29. If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger. A. B. C. D.

a tight monetary policy an inflationary increase in the price level international financial investment the central bank's contractionary monetary policy

Answer: B 30. If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with:

A. a contractionary monetary policy. B. an expansionary monetary policy. C. a discretionary monetary policy. D. a loose monetary policy. Answer: A

1.!If!South!Dakota's!governor!reports!a!budget!surplus!in!2011,!that!state!government!likely:! A.!received!more!in!taxes!than!it!spent!in!that!year. B.!increased!the!proportional!tax!level. C.!equalized!spending!and!taxes!in!that!year. D.!increased!the!corporate!income!tax!rate. Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

2.!If!the!state!of!Washington's!government!collects!$75!billion!in!tax!revenues!in!2013!and!total!spending!in! the!same!year!is!$74.8!billion,!the!result!will!be!a:! A.!budget!deficit. B.!budget!surplus. C.!decrease!in!payroll!tax. D.!decrease!in!proportional!taxes. Answer:!B!!!! !!

!!!!!!!!!!!!!!!!!!!!

3.!If!the!government!for!the!state!of!Washington!collects!$65.8!billion!in!tax!revenues!in!2013!and!total! spending!in!the!same!year!is!$74.8!billion,!the!result!will!be:! A.!an!increase!in!payroll!tax. B.!an!increase!in!excise!tax. C.!a!budget!surplus. D.!a!budget!deficit. Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

4.!A!______________________!is!created!each!time!the!federal!government!spends!more!than!it!collects!in!taxes!in!a! given!year. A.!budget!deficit B.!budget!surplus C.!corporate!tax D.!regressive!tax Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

5.!A!______________________!means!that!government!spending!and!taxes!are!equal. A.!fiscal!budget B.!balanced!budget C.!contractionary!fiscal!policy D.!discretionary!fiscal!policy

Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

6.!A!__________________________!policy!will!cause!a!greater!share!of!income!to!be!collected!from!those!with!high! incomes!than!from!those!with!lower!incomes. A.!proportional!tax B.!regressive!tax C.!progressive!tax D.!excise!tax Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

7.!A!________________________________!is!calculated!as!a!flat!percentage!of!income!earned,!regardless!of!level!of! income. A.!progressive!tax B.!regressive!tax C.!proportional!tax D.!estate!and!gift!tax Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

8.!When!the!share!of!individual!income!tax!collected!by!the!government!from!people!with!higher!incomes!is! smaller!than!the!share!of!tax!collected!from!people!with!lower!incomes,!then!the!tax!is!____________________. A.!optional

B.!proportional C.!progressive D.!regressive Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

9.!In!2010,!Microsoft!will!pay!corporate!income!tax!to!the!federal!government!based!on!the!company's! __________________. A.!proportional!tax!rate B.!corporate!profits C.!optional!tax!rate D.!excise!profits Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

10.!What!do!goods!like!gasoline,!tobacco,!and!alcohol!typically!share!in!common? A.!A!progressive!tax!is!imposed!on!each!of!them. B.!A!regressive!tax!is!imposed!on!each!of!them. C.!They!are!all!subject!to!government!excise!taxes. D.!They!are!all!subject!to!government!fiscal!taxes. Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

11.!The!federal!government!levies!_____________________________!on!people!who!pass!assets! ____________________________,!either!after!death!or!during!life. A.!an!estate!and!gift!tax;!to!the!next!generation! B.!a!regressive!tax;!to!non-family!members C.!an!excise!tax;!to!their!children D.!a!progressive!tax;!to!non-family!members Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

12.!If!government!tax!policy!requires!Peter!to!pay!$15,000!in!tax!on!annual!income!of!$200,000!and!Paul!to! pay!$10,000!in!tax!on!annual!income!of!$100,000,!then!the!tax!policy!is:!! A.!optional. B.!progressive. C.!proportional. D.!regressive. Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

13.!If!government!tax!policy!requires!Jane!to!pay!$25,000!in!taxes!on!annual!income!of!$200,000!and!Mary!to! pay!$10,000!in!tax!on!annual!income!of!$100,000,!then!the!tax!policy!is:!! A.!regressive. B.!progressive. C.!proportional. D.!optional. Answer:!B!!!!

!! !!!!!!!!!!!!!!!!!!!!

14.!If!government!tax!policy!requires!Bill!to!pay!$20,000!in!taxes!on!annual!income!of!$200,000!and!Paul!to! pay!$10,000!in!tax!on!annual!income!of!$100,000,!then!the!tax!policy!is:!! A.!regressive. B.!progressive. C.!proportional. D.!optional. Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

15.!By!June,!2010,!the!U.S.!government!owed!$13.6!trillion!dollars!________________!that,!over!time,!has! remained!unpaid. A.!from!decreases!in!excise!tax B.!from!decreases!in!income!tax C.!in!accumulated!government!debt D.!from!decreases!in!corporate!tax Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

16.!The!government!can!use!_____________!in!the!form!of!____________________!to!increase!the!level!of!aggregate! demand!in!the!economy. A.!an!expansionary!fiscal!policy;!an!increase!in!government!spending B.!a!contractionary!fiscal!policy;!a!reduction!in!taxes C.!a!contractionary!fiscal!policy;!an!increase!in!taxes

D.!an!expansionary!fiscal!policy;!an!increase!in!corporate!taxes Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

17.!If!a!government!reduces!taxes!in!order!to!increase!the!level!of!aggregate!demand,!what!type!of!fiscal! policy!is!being!used? A.!discretionary B.!contractionary C.!standardized D.!expansionary Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

18.!A!typical!____________________________!fiscal!policy!allows!government!to!decrease!the!level!of!aggregate! demand,!through!increases!in!taxes. A.!expansionary B.!contractionary C.!discretionary D.!standardized Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

19.!Which!of!the!following!terms!is!used!to!describe!the!set!of!policies!that!relate!to!government!spending,! taxation,!and!borrowing?

A.!financial!policies B.!monetary!policies C.!fiscal!policies! D.!economic!policies Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

20.!A!government!collects!$70!billion!quarterly!in!tax!revenue.!Each!year!it!allocates!$15!billion!to!the!justice! system!and!$29!billion!for!the!administrative!costs.!What!percentage!of!its!total!annual!tax!revenue!is!left!for! allocation!to!the!remaining!categories!of!government!spending? A.!84.29% B.!15.71% C.!62.85% D.!37.15% Answer:!A!!!! !!**This!question!has!a!higher!degree!of!difficulty!because!students!must!calculate!total!annual!revenue!based! on!tax!revenue!collected!quarterly!prior!to!calculating!the!remaining!percentage. !!!!!!!!!!!!!!!!!!!!

21.!A!government!annually!allocates!$5!billion!of!its!total!tax!revenue!to!weather!related!disaster!relief,!$21! billion!to!healthcare!and!$11!billion!to!education.!If!the!government's!quarterly!tax!revenue!is!$33!billion,! what!percentage!of!its!budget!is!allocated!annually!to!healthcare?! A.!17.50% B.!63.63% C.!25.00% D.!15.90% Answer:!D!!!!

!!**This!question!has!a!higher!degree!of!difficulty!because!students!must!calculate!total!annual!revenue!based! on!tax!revenue!collected!quarterly!prior!to!calculating!the!percentage!annually!allocated!to!healthcare. !!!!!!!!!!!!!!!!!!!!

22.!A!government!collects!$700!billion!annually!in!tax!revenue.!Each!year!it!allocates!$70!billion!to!the!justice! system!and!$130!billion!for!its!own!administrative!costs.!What!percentage!of!annual!tax!revenue!is!allocated! to!these!two!categories!of!government!spending? A.!37.15% B.!28.57% C.!17.51% D.!27.58% Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

23.!A!government!annually!collects!$230!billion!in!tax!revenue!and!allocates!$70!billion!to!military!spending.! What!percentage!of!this!government's!budget!is!spent!on!its!military? A.!27.50% B.!36.63% C.!30.43% D.!41.90% Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

24.!A!government!annually!collects!$320!billion!in!tax!revenue!and!allocates!$42!billion!to!education! spending.!What!percentage!of!this!government's!budget!is!spent!on!education? A.!24.50% B.!12.31%

C.!30.13% D.!13.12% Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

25.!A!government!annually!collects!$230!billion!in!tax!revenue!and!allocates!$29!billion!to!its!universal! healthcare!spending.!What!percentage!of!this!government's!budget!is!spent!on!healthcare? A.!12.60% B.!26.63% C.!16.43% D.!21.90% Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

26.!A!government!collects!$600!billion!annually!in!tax!revenue.!Each!year!it!allocates!$35!billion!to!healthcare! and!$50!billion!for!education.!What!percentage!of!annual!tax!revenue!is!allocated!to!these!two!categories!of! government!spending? A.!21.37% B.!14.16% C.!17.51% D.!26.41% Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

27.!A!government!collects!$700!billion!annually!in!tax!revenue.!Each!year!it!allocates!$130!billion!to!interest! payments!that!it!must!pay!on!its!accumulated!debt.!What!percentage!of!annual!tax!revenue!is!allocated!to! make!these!interest!payments? A.!17.15% B.!28.75% C.!18.57% D.!27.58% Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

28.!When!the!government!passes!a!new!law!that!explicitly!changes!overall!tax!or!spending!levels,!it!is! enacting: A.!discretionary!fiscal!policy. B.!progressive!fiscal!policy. C.!regressive!fiscal!policy. D.!fiscal!policy. Answer:!A!!!! !! !!!!!!!!!!!!!!!!!!!!

29.!_____________________!are!a!form!of!tax!and!spending!rules!that!can!affect!aggregate!demand!in!the!economy! without!any!additional!change!in!legislation. A.!Standardized!employment!budgets B.!Discretionary!fiscal!policies C.!Automatic!stabilizers! D.!Budget!expenditures Answer:!C!!!!

!! !!!!!!!!!!!!!!!!!!!!

30.!In!2009,!the!U.S.!government!spent!$1.4!trillion!more!than!it!collected!in!taxes.!This!deficit!was!about: A.!22%!of!the!size!of!the!U.S.!GDP!in!2009. B.!26%!of!the!size!of!the!U.S.!GDP!in!2009. C.!18!%!of!the!size!of!the!U.S.!GDP!in!2009. D.!10%!of!the!size!of!the!U.S.!GDP!in!2009. Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

31.!Which!of!the!following!is!the!percentage!of!annual!US!government!spending!allocated!to!foreign!aid? A.!21% B.!10% C.!1% D.!17% Answer:!C!!!! !! !!!!!!!!!!!!!!!!!!!!

32.!At!the!beginning!of!2009,!a!government!had!a!total!debt!of!$540!billion!dollars.!It!ended!2009!with!a!$6! billion!dollar!budget!surplus.!In!2010,!its!budget!surplus!reached!$8!billion!dollars.!!What!is!the!total!debt!of! the!government!equal!to!at!the!end!of!2010? A.!$554!billion B.!$540!billion C.!$0

D.!$14!billion Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

33.!At!the!beginning!2010,!the!government!of!Norway!had!no!debt!and!held!$180!billion!dollars!in!its! sovereign!fund.!To!stimulate!its!economy!during!2011,!Norway's!government!plans!to!spend!$35!billion!more! than!it!will!collect!in!tax!revenue!and!in!2012,!its!spending!will!exceed!tax!revenues!by!$25!billion.!!What!will! the!total!government!debt!equal!at!the!end!of!2012? A.!$60!billion B.!$0 C.!$120!billion D.!$180!billion Answer:!B!!!! !! !!!!!!!!!!!!!!!!!!!!

34.!If!a!country’s!GDP!increases,!but!its!debt!also!increases!during!that!year,!then!the!country’s!debt!to!GDP! ratio!for!the!year!will!_______________!in!proportion!to!the!magnitude!of!the!changes. A.!decrease!because!GDP!increased B.!increase!because!its!debt!increased C.!increase D.!increase!or!decrease Answer:!D!!!! !! !!!!!!!!!!!!!!!!!!!!

35.!If!a!country’s!GDP!inc...