In 2001, the government of Happy Isle had tax revenues of £1 million, and spent £500,000 on transfer payments, £250,000 on goods and services and £300,000 on debt interest. In 2001, the government of Happy Isle had a ________________.

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

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

-£1 million
£0.5 million
-£0.5 million
£1 million

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

6
0
0.75
0.6

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

5.00
2.50
0.60
1.67

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

10 billion seashells
40 billion seashells
60 billion seashells
50 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 lump-sum tax multiplier in Frost is ______________.

-3
3
-4
4

The _______, the smaller is the government purchases multiplier.

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

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

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

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

does not change; increases by less than £3 million
does not change; does not change
rises; increases by less than £3 million
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; increase
increase; decrease
increase; increase
not change; not change