In 2000, the federal government of Happy Isle had revenues of $1 million, and spent $500,000 on transfer payments, $250,000 on goods and services and $300,000 on debt interest. In 2000, the government of Happy Isle had a ________________.

balanced budget
budget deficit of -$50,000
budget surplus of $50,000
budget deficit of $50,000

A country has been in existence for only two years. In the first year, government revenues were $1.0 million and government outlays were $1.5 million. In the second year, government revenues were $1.5 million and government outlays were $2.0 million. At the end of the second year, the government had issued debt worth _______________.

$0.5 million
$1 million
-$0.5 million
-$1 million

The table shows consumption expenditure, investment, and government expenditures on the island of Whitepool. Whitepool has no taxes, and it does not trade internationally. The marginal propensity to consume is ________.

0.75
6
0
0.6

The table shows consumption expenditure, investment, and government expenditures on the island of Whitepool. Whitepool is a closed economy that has no taxes and a fixed price level. The government expenditures multiplier is ____________.

5.00
0.60
1.67
2.50

The table shows consumption expenditure, investment, and government expenditures on the island of Whitepool. Whitepool is a closed economy that has no taxes and a fixed price level. If government expenditures increase by 4 seashells, the new equilibrium expenditure is ________________.

50 billion seashells
60 billion seashells
10 billion seashells
40 billion seashells

The economy of Frost has no induced taxes, does not trade internationally, and has a fixed price level. The marginal propensity to consume is 0.75. The autonomous tax multiplier in Frost is ______________.

-3
3
4
-4

The _______, the smaller is the government expenditures multiplier.

larger the investment
larger the marginal propensity to consume
smaller the marginal propensity to save
higher the marginal tax rate

In an economy, the government expenditures multiplier is 3. If government expenditures increase by $1 million, then in the short run, the price level _______ and real GDP ______ $3 million.

falls; decreases by less than
rises; decreases by less than
rises; equals
rises; increases by less than

In an economy, the government expenditures multiplier is 3 and the economy is at potential real GDP. If potential GDP does not change when government expenditures increase by $1 million, then in the long run, the price level _______ and real GDP _______.

does not change; increases by less than $3 million
rises; increases by less than $3 million
does not change; does not change
rises; does not change

If fiscal policy has a greater demand-side effect than supply-side effect, then expansionary fiscal policy will ______ the price level and _______ real GDP.

not change; not change
increase; decrease
not change; increase
increase; increase

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