Question

Q60. If the government increases spending and raises taxes by just enough to finance this increase it will--------------------

a. Reduce output                     b. increase the MPC                  c. leave output unchanged                 d. increase output                  

Q61. Starting from a balanced budget, for a given tax rate, an increase in income will cause the government budget to

a. Remain unchanged              b. move into surplus                     c. move into deficit                          d. both b and c              

Q62. For given government spending and taxation, the government budget deficit will grow in--------- and decline in-------

a. booms, booms                  b. booms, recessions                 c. recessions, booms                     d. recession, recession                      

Q63. When investment is assumed to autonomous the slope of the AD schedule is determined by the--------------------------

a. marginal propensity to consume   b. average propensity to consume    c. marginal propensity to invest   d. disposable income     

Q64. Nominal GDP measures income ---------------------------------------

a. At present time               b. At current prices        c. Corrected for tax changes       d. Corrected for changes in interest rates         

Answer 1

a) "D" it will increase the output as the government spending multiplier is more than the tax multiplier.

b) "B"

It will increase the tax collection and hence the budget will move into surplus

c) "C" the deficit will grown in recession and decline in boom as it is anticyclical.

d) "A"

The marginal propensity to consumer determines the slope of the curve.

e) "B"

If measures the GDP at the current price level.