Question 1

The government's budget is:

Accepted Answer

A)  government purchases plus transfer payments equal taxes plus revenue from money creation.
B)  government purchases plus transfers less taxes equal revenue from money creation.
C)  the negative of government equals transfers less taxes, if revenue from money creation is zero.
D)  all of the above.E) A) and D)
F) B) and D)

Question 2

The biggest category of state and local expenditures are:

Accepted Answer

A)  education.
B)  social protection.
C)  defense.
D)  none of the above.E) B) and D)
F) None of the above

Question 3

The model predicts that a temporary decrease in government purchases causes:

Accepted Answer

A)  an increase in consumption.
B)  a reduction in real GDP.
C)  an increase in gross investment.
D)  all of the above.E) None of the above
F) A) and B)

Question 4

The government's budget constraint is:

Accepted Answer

A)  Gt + Vt = Tt + (Mt - Mt-1 ) /P
B)  Gt + Vt - Tt = (Mt - Mt-1 ) /P
C)  -Gt = Vt - Tt, if revenue from money creation is zero.
D)  all of the above.E) None of the above
F) All of the above

Question 5

The model predicts that a temporary decrease in government purchases causes:

Accepted Answer

A)  an increase in consumption.
B)  a reduction in real GDP.
C)  an increase in gross investment.
D)  all of the above.E) None of the above
F) B) and C)

Question 6

A temporary decrease in government purchases does not increase the real wage according to the market clearing model because:

Accepted Answer

A)  labour supply and labour demand decrease about the same amount.
B)  labour supply is fixed.
C)  labour demand is downward sloping.
D)  neither labour demand nor labour supply shift due to the permanent increase in government purchases.E) A) and B)
F) A) and C)

Question 7

What has been the US experience in war time temporary increase in government purchases and how do they conform with the predictions of the model?

Accepted Answer

Counter to the predictions of the model,...

Question 8

Among the government's uses of funds are;

Accepted Answer

A)  transfer payments.
B)  tax revenue.
C)  real revenue from printing money.
D)  all of the above.E) C) and D)
F) B) and D)

Question 9

If a household's transfer payments less taxes is positive, then the government:

Accepted Answer

A)  is a net source of funds for that household.
B)  is a net use of fund of funds for that household.
C)  is a net drain on that household.
D)  does not affect that household's budget constraint.E) A) and D)
F) B) and C)

Question 10

The model predicts that a temporary increase in government expenditures will lead to:

Accepted Answer

A)  a decrease in consumption.
B)  an increase in investment.
C)  a decrease in GDP.
D)  none of the above.E) B) and C)
F) A) and C)

Question 11

People might work more during a war time temporary increase in government purchases because of:

Accepted Answer

A)  patriotism.
B)  the increase in the MPL as the model predicts.
C)  increased investment the model predicts.
D)  all of the above.E) None of the above
F) All of the above

Question 12

What are the effects of a temporary increase in government purchases?

Accepted Answer

If government purchases rise temporarily...

Question 13

What is the government's budget constraint without government borrowing and what does it show us?

Accepted Answer

The government's budget constraint witho...

Question 14

If the money supply does not change, then the government's budget constraint without borrowing is:

Accepted Answer

A)  Gt - Vt = Tt
B)  Gt = Vt - Tt
C)  -Gt = Vt - Tt
D)  all of the above.E) None of the above
F) C) and D)

Question 15

In the market clearing model the intertemporal substitution effect from a permanent increase in government purchases:

Accepted Answer

A)  works through real interest rate changes.
B)  works through real wage changes.
C)  works through real interest rate and real wage changes.
D)  does not exist because the real interest rate and real wage rated do not change.E) A) and B)
F) B) and C)

Question 16

With a permanent change in government purchases the model predicts consumption is:

Accepted Answer

A)  acyclical.
B)  procyclical.
C)  countercylical.
D)  exogenous.E) B) and C)
F) C) and D)

Question 17

Government can use its funds to purchase goods or transfer money to people.

Accepted Answer

A) True 
 B)False

Question 18

Among the government's sources of funds are;

Accepted Answer

A)  transfer payments.
B)  tax revenue.
C)  government purchases.
D)  all of the above.E) All of the above
F) None of the above

Question 19

How does government without borrowing affect the household's budget constraint?

Accepted Answer

The household both receives transfer pay...

Question 20

A temporary decrease in government purchases does not decrease the real interest rate according to the market clearing model because:

Accepted Answer

A)  the supply of capital services and demand for capital services decrease about the same amount.
B)  neither demand for capital services nor supply of capital services shift due to the permanent increase in government purchases.
C)  the demand for capital services is downward sloping.
D)  the supply of capital services is upward sloping.E) B) and C)
F) A) and B)

Exam 13: Government Expenditure

The model predicts that a temporary decrease in government purchases causes:

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With a permanent change in government purchases the model predicts consumption is:

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The government's budget constraint is:

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Government can use its funds to purchase goods or transfer money to people.

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The biggest category of state and local expenditures are:

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The model predicts that a temporary decrease in government purchases causes:

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If the money supply does not change, then the government's budget constraint without borrowing is:

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A temporary decrease in government purchases does not decrease the real interest rate according to the market clearing model because:

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The government's budget is:

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People might work more during a war time temporary increase in government purchases because of:

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A temporary decrease in government purchases does not increase the real wage according to the market clearing model because:

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In the market clearing model the intertemporal substitution effect from a permanent increase in government purchases:

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What has been the US experience in war time temporary increase in government purchases and how do they conform with the predictions of the model?

Correct AnswerverifiedCounter to the predictions of the model,...View AnswerShow Answer

Among the government's uses of funds are;

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How does government without borrowing affect the household's budget constraint?

Correct AnswerverifiedThe household both receives transfer pay...View AnswerShow Answer

The model predicts that a temporary increase in government expenditures will lead to:

Correct AnswerverifiedShow Answer

Among the government's sources of funds are;

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What are the effects of a temporary increase in government purchases?

Correct AnswerverifiedIf government purchases rise temporarily...View AnswerShow Answer

If a household's transfer payments less taxes is positive, then the government:

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What is the government's budget constraint without government borrowing and what does it show us?

Correct AnswerverifiedThe government's budget constraint witho...View AnswerShow Answer

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Counter to the predictions of the model,...
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Correct Answer
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The household both receives transfer pay...
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Correct Answer
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If government purchases rise temporarily...
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Correct Answer
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The government's budget constraint witho...
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