2ND

• The tax multiplier is*
• • The tax multiplier is less than the government expenditure multiplier
• The multiplier is

  • 1/MPS
• The tools of government fiscal policy include all of the following except:

  • changes in the money supply
• Given a MPC of 0.90 and a P10 increase in investment, the level of income will change by

  • increase by 10
• Which of the following is not correct?

  • MPS=MPC+1 /
• Assume   increases by P1 billion and taxes are unchanged. If the MPS is .20, the equilibrium GDP (income) will increase by ______ billion

  • P5 /
• If a nation buys P4.5 billion in foreign goods and services and sells P0.5 billion to foreigners, it has a:

  • deficit of P4 billion in its balance of trade 
• Assume the current equilibrium level of income is P200 billion as compared to the full employment income level of P240 billion. If the MPC is 0.8, what change in government expenditures is needed to achieve full employment?

  • an increase of P8 billion /
• The value of net exports is:

  • an injection into the economy if exports exceed imports
• If the value of the multiplier is 5, an increase in investment of P10 will induce an increase in consumption of:

  • P40 /
• The numerical value of the simple multiplier will be larger the

  • smaller the marginal propensity to save
• If the full employment level of output is P500, the existing equilibrium level of output is P380, and the value of MPS is .20, full employment equilibrium can be achieved by additional

  • government expenditures of P24
• If disposable income rises from P600 billion in year 1 to P650 billion in year 2 and household consumption subsequently increases from P540 billion in year 1 to P570 billion in year 2, the marginal propensity to consume in year 1 was*

  • 0.60
• The marginal propensity to consume is

  • the percentage of additional disposable income that households spend.
• If equilibrium income is P500 billion, MPC = 0.75, and investment spending increases by P20 billion, the new equilibrium income will be

  • P560  
• The policy of the government with regard to the level of government purchases, the level of transfers and the tax structures.*

  • fiscal policy
• All of the following are variables that can be manipulated to affect fiscal policy except:

  • The rate of interest.
• Contractionary fiscal policy can involve:

  • Decreasing government spending and increasing taxes.
• To help fight a recession, the government could:

  • Decrease taxes to increase aggregate demand.
• The instruments of Fiscal Policy include:

  • Government Spending and taxes.
• Which of the following is not an example of fiscal policy?

  • Higher interest rates
• The policy that accords with expenditure and taxation policies decisions of the government? Fiscal Policy
• MPC + MPS > 1.

  • False
• A balanced budget happens in a country when govt spending (expenditures going out) =  govt revenue (taxes brought in).*

  • True
• If exchange rates are high

  • Discourage the level of imports
• The exchange rate*

  • Enables one to know the value of the foreign currency.
  • Establishes the international value of a currency in international transactions.
  • Serves as a connecting link between the price levels of one country with the rest of the world.
  • All of the above /
• If the increase in exports exceeds the increase in imports, ceteris paribus, the level of income will

  • Rise
•   An appreciation of the peso will make Philippine exports cheaper abroad and imports dearer at home

  • FALSE