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25 Jan 2019

1.Holding everything else constant, if Government spending increases:

A

The growth rate of GDP will rise.
B

The growth rate of GDP will fall.
C

Changes in government spending will have no effect on GDP.

The coupon on a bond is:

A.

The difference between the market value of the bond and its par value.
B.

The rate of return on a newly issued bond and changes annually with market interest rates.
C.

The annual bond dividend.
D.

The rate of return on a newly issued bond and remains fixed for the life of the bond.

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Related questions

Calculate the government-taxation multiplier for each marginal propensity to consume. Instructions: Round your answers to two decimal places.

a. The marginal propensity to consume (MPC) = 0.2, and the government spending multiplier is 1.25. The taxation multiplier is ?.

b. The marginal propensity to consume (MPC) = 0.5, and the government spending multiplier is 2.00. The taxation multiplier is ?.

c. The marginal propensity to consume (MPC) = 0.8, and the government spending multiplier is 5.00. The taxation multiplier is ?.

 

d. What do your results imply about the relative strength of changes in government spending versus changes in taxation for fiscal policy, all else equal?

i.   Changes in government spending will have an indeterminate effect on GDP and income compared to changes in taxes.

ii.  Changes in government spending will have a bigger effect on GDP and income than will changes in taxes.

iii. Changes in government spending will have an equal effect on GDP and income compared to changes in taxes.

iv. Changes in government spending will have a smaller effect on GDP and income than will changes in taxes.

PART (i) What is the effect of a decrease in both government spending and taxes by the same amount?

A. GDP will fall but unemployment will rise.

B. GDP will rise and unemployment will fall.

C. Both GDP and unemployment will fall.

D. Both GDP and unemployment will rise.

E. There will be no effect on GDP or unemployment.

PART (ii): What will an increase in the money supply tend to do?

A. Increase interest rates and lower the equilibrium GDP.

B. Increase the interest rates and increase the equilibrium GDP.

C. lower interest rates and increase equilibrium GDP.

D. lower interest rates and lower the equilibrium GDP.

E. Interest rate and equilibrium GDP does not change

1. What happens when the price level rises?
a. The value of money rises, and exchange rates and interest rates also rise.
b. The value of money rises, while exchange rates and interest rates fall.
c. The value of money falls while exchange rates and interest rates rise.
d. The value of money falls, and exchange rates and interest rates also fall.


2. Which of the following best describes what happens when the price level rises?
a. Households increase foreign bond purchases, and the supply of dollars increases.
b. Households increase foreign bond purchases, and the supply of dollars decreases.
c. Households decrease foreign bond purchases, and the supply of dollars increases.
d. Households decrease foreign bond purchases, and the supply of dollars decreases.


3. In which of the following situations does investment spending increase?
a. when the price level rises, causing interest rates to rise
b. when the price level rises, causing interest rates to fall
c. when the price level falls, causing interest rates to rise
d. when the price level falls, causing interest rates to fall

4. If a government started with a deficit and moved to a surplus, which of the following best describes the
effects of these changes?
a. Domestic investment and the real exchange rate would rise.
b. Domestic investment and the real exchange rate would fall.
c. Domestic investment would rise, and the real exchange rate would fall.
d. Domestic investment would fall, and the real exchange rate would rise.

5. Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the
minimum wage. In the short run, what would we expect to happen?
a. the price level to rise, and real GDP to fall
b. the price level to fall, and real GDP to remain unchanged
c. the price level to remain unchanged, and real GDP to fall
d. the price level to fall, and the real GDP to rise the same

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