ECO 302 Week 8 Quiz - Strayer

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.




35. The real wage increase in the data during war time might be overstated as:
a. price controls lead to understating the price level. c. because capital utilization falls in war time.
b. labor demand is so high in war time. d. all of the above.




36. With a temporary change in government purchases the model predicts investment is:
a. acyclical. c. countercylical.
b. procyclical