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Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

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Question 21

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(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: $\begin{array}{l}\text { Gross Domestic }\\\underline{\text { Product (GDP) } } & \underline{\text { Consumption (C) }} \\\$100 & \$1 40 \\200 & 200 \\300 & 260 \\400 & 320 \\500 & 380\end{array}$ Refer to the data.If a 10 percent proportional tax on income is imposed,the consumption schedule will now be:

A)
$\begin{array} { l } \underline{ \text { GDP } }&\underline{\text { C} }\\\$100&\$134\\200 &188 \\300 & 242 \\400 &296 \\500&350 \\\end{array}$
B)
$\begin{array} { l } \underline{ \text { GDP } }&\underline{\text { C} }\\\$100&\$144\\200 &212 \\300 & 78 \\400 &344 \\500&410 \\\end{array}$
C)
$\begin{array} { l } \underline{ \text { GDP } }&\underline{\text { C} }\\\$100&\$134\\200 &194 \\300 & 254\\400 &324 \\500&374 \\\end{array}$
D)
$\begin{array} { l } \underline{ \text { GDP } }&\underline{\text { C} }\\\$100&\$146\\200 &218 \\300 & 286 \\400 &352 \\500&412 \\\end{array}$

E) B) and D)
F) None of the above

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Question 22

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The public debt is the amount of money that:

A) state and local governments owe to the federal government.
B) Americans owe to foreigners.
C) the federal government owes to holders of U.S.securities.
D) the federal government owes to taxpayers.

E) A) and D)
F) B) and C)

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Question 23

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Answer the question on the basis of the following before-tax consumption schedule for a closed economy: $\begin{array}{l}\text { Gross Domestic }\\\underline{\text { Product (GDP) } } & \underline{\text { Consumption (C) }} \\\$0 & \$ 40 \\100 & 120 \\200 & 200 \\300 & 280 \\400 & 360\end{array}$ Refer to the data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy,the marginal propensity to consume is:

An economist who favored expanded government would recommend:

Which of the following is a true statement?

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt. $\begin{array}{c}\begin{array}{lll}\\\\\text {Year 1}\\\text {Year 2}\\\text {Year 3}\\\text {Year 4}\\\text {Year 5}\\\text {Year 6}\end{array}\begin{array}{c}\text {Government}\\\underline{\text {Spending}}\\ \$ 450 \\500\\600\\640\\680\\600\end{array}\begin{array}{c}\\\underline{\text {Tax Revenues}}\\\$ 425 \\450 \\500 \\620 \\580 \\620\end{array}\begin{array}{c}\\\underline{\text { GDP }} \\ \$ 2,000 \\3,000 \\4,000 \\5,000 \\4,800 \\5,000\end{array}\end{array}$ Refer to the data.As a percentage of GDP,the:

Other things equal,the stock of capital inherited by future generations is likely to be smaller when government spending:

According to Congressional Budget Office (CBO) projections:

The American Recovery and Reinvestment Act of 2009 was implemented primarily to:

Which of the following best describes the built-in stabilizers as they function in the United States?

Which of the following fiscal policy actions is most likely to increase aggregate supply?

Which of the following is the best example of public investment?

Payment of interest on the U.S.public debt:

In 2012,the U.S.federal debt held by the public was:

Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4.Also assume that it used its budget surpluses to pay down the public debt.At the end of these four years,the federal government's public debt would have:

When current government expenditures exceed current tax revenues and the economy is achieving full employment:

Built-in stability means that:

Countercyclical discretionary fiscal policy calls for:

The amount by which government expenditures exceed revenues during a particular year is the:

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP.The government is engaging in a(n) :