ECO201 Chapter 17 Test Questions and Answers Fully Solved Graded A+
Currently, the US government accumulated debt to GDP ratio: - Answers is lower than its historical high
point hit in 2020.
Which of the following terms is used to describe the set of policies that relate to government spending,
taxation, and borrowing? - Answers fiscal policies
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal
policy is being used? - Answers expansionary
A _______________ policy will cause a greater share of income to be collected from those with high
incomes than from those with lower incomes. - Answers progressive tax
Assume that laws have been passed that require the federal government to run a balanced budget.
During a recession, the government will want to implement _____________________, but may be
unable to do so because such a policy would _______________ - Answers expansionary fiscal policy;
lead to a budget deficit
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: - Answers progressive.
If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over
half the households in the country pay more in payroll taxes than in income taxes? - Answers income tax
is a progressive tax
Assume Blueland is a country with a balanced budget and automatic stabilizers in 2021. In 2022,
Blueland's economy produces at a level that exceeds its potential GDP. In 2022, its standardized
employment budget will show a __________________ than the actual budget. - Answers smaller surplus
_____________________ are a form of tax and spending rules that can affect aggregate demand in the
economy without any additional change in legislation. - Answers automatic stabilizers
A consensus estimate based on a number of studies suggests that if there is an increase in budget
deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? -
Answers an increase in 0.5-1.0% in the long term interest rate
If Canada's economy moves into an expansion while its economy is producing more than potential GDP,
then: - Answers automatic stabilizers will decrease government spending and increase tax revenue.
If the economy is producing less than its potential GDP, _____________________ will show a larger
deficit than the actual budget. - Answers the standardized employment budget
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. - Answers
increase or decrease
Currently, the US government accumulated debt to GDP ratio: - Answers is lower than its historical high
point hit in 2020.
Which of the following terms is used to describe the set of policies that relate to government spending,
taxation, and borrowing? - Answers fiscal policies
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal
policy is being used? - Answers expansionary
A _______________ policy will cause a greater share of income to be collected from those with high
incomes than from those with lower incomes. - Answers progressive tax
Assume that laws have been passed that require the federal government to run a balanced budget.
During a recession, the government will want to implement _____________________, but may be
unable to do so because such a policy would _______________ - Answers expansionary fiscal policy;
lead to a budget deficit
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: - Answers progressive.
If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over
half the households in the country pay more in payroll taxes than in income taxes? - Answers income tax
is a progressive tax
Assume Blueland is a country with a balanced budget and automatic stabilizers in 2021. In 2022,
Blueland's economy produces at a level that exceeds its potential GDP. In 2022, its standardized
employment budget will show a __________________ than the actual budget. - Answers smaller surplus
_____________________ are a form of tax and spending rules that can affect aggregate demand in the
economy without any additional change in legislation. - Answers automatic stabilizers
A consensus estimate based on a number of studies suggests that if there is an increase in budget
deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? -
Answers an increase in 0.5-1.0% in the long term interest rate
If Canada's economy moves into an expansion while its economy is producing more than potential GDP,
then: - Answers automatic stabilizers will decrease government spending and increase tax revenue.
If the economy is producing less than its potential GDP, _____________________ will show a larger
deficit than the actual budget. - Answers the standardized employment budget
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. - Answers
increase or decrease
