chapter 13 - worth publishers

,Krugman/Wells,Fiscal Policy,13,CHECK YOUR UNDERSTANDING,Check Your Understanding 13-1Questions 1 and 2,1a) Several military bases around the country, which together employ tens of thousands of people, are closed. Is this an example of an expansionary or contractionary fiscal policy?,expansionarycontractionary,1b) The length of unemployment benefits is increased. Is this an example of an expansionary or contractionary fiscal policy?,expansionarycontractionary,1c) A federal tax on gas is increased. Is this an example of an expansionary or contractionary fiscal policy?,expansionarycontractionary,2) Federal disaster relief, which quickly disburses funds to victims of natural disasters will stabilize the economy more effectively after a disaster than relief that must be legislated.,TrueFalse,Check Your Understanding 13-2Question 1*,Suppose that real GDP is $500 billion, potential outputis $600 billion and the MPC is 0.8.,1a*) Suppose that real GDP is $500 billion, potential outputis $600 billion and the MPC is 0.8. By how much must government spending change to close the gap?,$100 billion$48 billion$25 billion$20 billion,1b*) Suppose that real GDP is $500 billion, potential outputis $600 billion and the MPC is 0.8. By how much must taxes decrease to close the gap?,$100 billion$48 billion$25 billion$20 billion,Check Your Understanding 13-2Questions 1 and 2,1) Which of the following three policies would generate the largest shift in aggregate demand?,An increase of $500 million in government purchases of goods and services.A $500 million decrease in taxes.A $500 million increase in government transfers.,Check Your Understanding 13-2Question 3,3. The country of Boldovia has no unemployment insurance benefits and a tax system using only lump-sum taxes. Moldovia has generous unemployment benefits and a proportional tax system. Moldovia will experience greater variation in real GDP in response to demand shocks.,TrueFalse,Check Your Understanding 13-3Questions 1 and 2,1) The cyclically adjusted budget balance is a better measure of the long-run sustainability of government policies than the actual budget balance.,TrueFalse,2) States that are required by their constitutions to balance their budgets are likely to experience fewer severe economic fluctuations than states not held to that requirement.,TrueFalse,Check Your Understanding 13-4Questions 1 and 2,1a) If the rate of growth of GDP increased at a faster rate, assuming everything else were equal, the size of the public dept would be _ than it otherwise would have been.,greaterless,1b) If the rate retirees lived longer, assuming everything else were equal, implicit liabilities would be _ than it otherwise had been.,greaterless,1c) A decrease in tax revenue, assuming everything else is equal, the size of the public dept would be _ than it otherwise had been.,greaterless,1d) The government borrowing to pay interest on its current debt, assuming everything else is equal, would cause the size of the public debt to be _ than it otherwise had bee