ECO 302 Week 8 Quiz - Strayer
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Chapter 12 and 13
Chapter 12
TRUE/FALSE
1. Government
can use its funds to purchase goods or transfer money to people.
2. If
a household’s transfer payment less taxes is greater than zero, then government
is a net source of funds for that household.
3. A
permanent increase in government purchases causes an increase in the real rate
of interest.
4. A
permanent increase in government purchases increases GDP.
5. A
temporary increase in government purchases increases GDP.
6. A
temporary increase in government expenditures will reduce gross investment.
7. From
1929 to the present, government expenditures as a ratio to GDP have risen to
equal about one-third.
8. U.S.
government transfer payments in the form of unemployment insurance are equivalent
to about ten percent of GDP.
9. The
largest expansions in transfer payments at the U.S. federal level have been in
Social Seccurity and Medicare.
10. Across
a large sample of countries, the U.S. ratio of total government expenditure to
GDP is near the median.
MULTIPLE CHOICE
1. The
biggest category of government purchases in the US is:
a. state and local purchases. c. federal
government purchases.
b. defense purchases. d. federal
transfer payments.
2. Government
transfer payment as a percentage of GDP have been:
a. generally rising. c. cyclical.
b. generally falling. d. constant.
3. The
fastest growing part of the federal government budget since WWII is:
a. interest payments on the debt. c. transfer
payments.
b. defense spending. d. infrastructure.
4. State
and local governments purchases include:
a. defense spending. c. social
security retirement spending.
b. education spending. d. all
of the above.
5. The
biggest category of state and local expenditures are:
a. education. c. defense.
b. transfer payments. d. none
of the above.
6. State
and local governments purchases are about half:
a. interest on debt. c. defense.
b. transfer payments. d. none
of the above.
7. The
government budget constraint without borrowing is:
a. Gt + Vt = Tt + (Mt - Mt-1 )/P c. Gt
- Vt = Tt
b. Gt
= Tt + Vt d. Gt - Vt = Tt - (Mt -
Mt-1 )/P
8. The
government budget constraint is:
a. government purchases less transfer
payments equal revenue from money growth less taxes. c. government
purchases plus taxes equal transfer payment plus revenue from money creation.
b. government purchases plus transfer
payments equal taxes plus revenue from money growth. d. government
purchases times transfer payment equals taxes times revenue from money
creation.
9. The
government’s budget constraint is:
a. Gt + Vt = Tt + (Mt - Mt-1 )/P c. -Gt = Vt - Tt, if revenue from money creation is
zero.
b. Gt + Vt - Tt = (Mt - Mt-1 )/P d. all
of the above.
10. The
government’s budget is:
a. government purchases plus transfer
payments equal taxes plus revenue from money creation. c. the negative
of government equals transfers less taxes, if revenue from money creation is
zero.
b. government purchases plus transfers
less taxes equal revenue from money creation. d. all of the above.
11. If
there is no revenue from money growth, then the government’s budget constraint
without borrowing is:
a. Gt + Vt = Tt. c. Gt = Vt - Tt
b. Gt = Vt + Tt. d. all of the above.
12. If
the money supply does not change, then the government’s budget constraint
without borrowing is:
a. Gt - Vt = Tt c. -Gt = Vt - Tt
b. Gt = Vt - Tt d. all of the above.
13. Among
the government’s sources of funds are;
a. transfer payments. c. government
purchases.
b. tax revenue. d. all of the
above.
14. Among
the government’s sources of funds are;
a. transfer payments. c. real
revenue from printing money.
b. government purchases. d. all
of the above.
15. Among
the government’s uses of funds are;
a. transfer payments. c. real
revenue from printing money.
b. tax revenue. d. all of the
above.
16. Among
the government’s uses of funds are;
a. government purchases. c. real
revenue from printing money.
b. tax revenue. d. all of the
above.
17. In
the market clearing model without government borrowing, the net effect of
government on households is an increase in funds of:
a. transfer payments times taxes. c. taxes
less transfer payments.
b. transfer payments plus taxes. d. transfer
payments less taxes.
18. If
a household’s transfer payments less
taxes is positive, then the government:
a. is a net source of funds for that
household. c. is a net drain on that household.
b. is a net use of fund of funds for that
household. d. does not affect that household’s budget constraint.
19. If
a household’s transfer payments less
taxes is negative, then the government:
a. is a net source of funds for that
household. c. is a net subsidizer of that household.
b. is a net use of fund of funds for that
household. d. does not affect that household’s budget constraint.
20.
According to the market clearing model a permanent increase in government
purchases causes:
a. a decrease in consumption. c. an
increases in real GDP.
b. an increases in the real interest rate.
d. all
of the above.
21. According
to the market clearing model a permanent increase in government purchases leads
to:
a. an increase in capital utilization. c. an
increase in the demand for capital services.
b. a decrease in the supply of capita
services. d. no change in the real rate of interest.
22. According
to the market clearing model a permanent
increase in government purchases causes an increase in:
a. real GDP. c. the real wage
rate.
b. the real interest rate. d. none
of the above.
23. In
the market clearing model the intertemporal substitution effect from a
permanent increase in government purchases:
a. works through real interest rate
changes. c. works through real interest rate and real wage changes.
b. works through real wage changes. d. does
not exist because the real interest rate and real wage rated do not change.
24. In
the market clearing model a permanent decrease in government purchase will:
a. increase consumption. c. increase
the real wage rate.
b. increase the real interest rate. d. all
of the above.
25. In
the market clearing model a permanent increase in government purchases does not
increase the real wage because:
a. labor supply and labor demand increase
about the same amount. c. labor demand is downward sloping.
b. labor supply is fixed. d. neither
labor demand nor labor supply shift due to the permanent increase in government
purchases.
26. In
the market clearing model a permanent increase in government purchases does not
increase the real interest rate because:
a. the supply of capital services and demand for capital services increase
about the same amount. c. the demand for capital services is
downward sloping.
b. neither demand for capital services nor
supply of capital services shift due to the permanent increase in government
purchases. d. the supply of capital services is upward
sloping.
27. According
to the market clearing model, a one unit permanent increase in government
purchases causes:
a. GDP to rise about one unit. c. gross
investment to fall about one unit.
b. consumption to fall about one unit. d. all
of the above.
28. According
to the market clearing model a one unit permanent increase in government
purchases causes:
a. no change in GDP. c. no
change in gross investment.
b. consumption to fall about one unit. d. all
of the above.
29. US
data since the end of the Korean war shows that permanent changes in government
purchases are:
a. acyclical as the model predicts. c. acyclical
as opposed to the model that predicts they will be procyclical.
b. procyclical as the model predicts. d. countercyclical
as opposed to the model that predicts they will be acyclical.
30. Since
the end of the Korean war, US permanent government spending has:
a. increased as GDP has increased. c. had
little relationship to fluctuations in real GDP.
b. decreased as GDP has increased. d. decreased
when GDP decreased.
31. The
model predicts that a temporary increase in government purchases causes:
a. an increase in consumption. c. a
reduction in gross investment.
b. a reduction in real GDP. d. all
of the above.
32. The
model predicts that a temporary increase in government expenditures will lead
to:
a. a decrease in consumption. c. a
decrease in GDP.
b. an increase in investment. d. none
of the above.
33. People
might work more during a war time temporary increase in government purchases
because of:
a. patriotism. c. increased
investment the model predicts.
b. the increase in the MPL as the model
predicts. d. all of the above.
34. People
might work more during a war time temporary increase in government purchases
because of:
a. a military draft or voluntary
enlistment takes away some primary household earners and to maintain
consumption as the model predicts, those households may have other members work
who did not previously. c. increased investment leading to hire
capital stocks that increase the demand for labor as the model predicts.
b. the increase in the MPL leading to an
increase in the demand for labor and increased capital utilization as the model
predicts. d. all of the above.
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