Question 1

Medicaid, welfare payments, and Temporary Assistance to Needy Families are classified as

Accepted Answer

A)  unilateral payments. 
B)  transfer payments. 
C)  gifts. 
D)  income redistribution payments. 
A)  unilateral payments. 
B)  transfer payments. 
C)  gifts. 
D)  income redistribution payments.

Question 2

The bulk of transfer payment spending in the United States is undertaken by

Accepted Answer

A)  non-profit organizations in the private sector. 
B)  state governments. 
C)  local governments. 
D)  the federal government. 
A)  non-profit organizations in the private sector. 
B)  state governments. 
C)  local governments. 
D)  the federal government.

Question 3

Fiscal policy has a short implementation lag compared to monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of crowding out?

Accepted Answer

A)  A decrease in the rate of growth of the stock of money decreases GDP. 
B)  A deficit causes an increase in interest rates, which causes a decrease in investment spending. 
C)  An increase in tariffs causes a decrease in imports. 
D)  A decrease in government housing subsidies causes an increase in private spending on housing. 
A)  A decrease in the rate of growth of the stock of money decreases GDP. 
B)  A deficit causes an increase in interest rates, which causes a decrease in investment spending. 
C)  An increase in tariffs causes a decrease in imports. 
D)  A decrease in government housing subsidies causes an increase in private spending on housing.

Question 5

A contractionary fiscal policy is likely to

Accepted Answer

A)  reduce a government budget deficit and reduce borrowing by the Treasury. 
B)  increase a government budget deficit and increase borrowing by the Treasury. 
C)  reduce a government budget deficit and increase borrowing by the Treasury. 
D)  increase a government budget deficit and reduce borrowing by the Treasury. 
A)  reduce a government budget deficit and reduce borrowing by the Treasury. 
B)  increase a government budget deficit and increase borrowing by the Treasury. 
C)  reduce a government budget deficit and increase borrowing by the Treasury. 
D)  increase a government budget deficit and reduce borrowing by the Treasury.

Question 6

Which of the following is an automatic stabilizer?
I. inheritance taxes
II. government payments to war veterans
III. aid to families with dependent children
IV. sales taxes

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III only 
C)  II and III only 
D)  III only 
A)  I, II, III, and IV 
B)  I, II, and III only 
C)  II and III only 
D)  III only

Question 7

Discretionary fiscal policy refers to

Accepted Answer

A)  deliberate government efforts to stabilize the economy through government spending and taxes. 
B)  the use of automatic stabilizers and intervention policies to stabilize the economy. 
C)  any government policy that requires a lag period of at least three months. 
D)  the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy. 
A)  deliberate government efforts to stabilize the economy through government spending and taxes. 
B)  the use of automatic stabilizers and intervention policies to stabilize the economy. 
C)  any government policy that requires a lag period of at least three months. 
D)  the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy.

Question 8

Which of the following would supply-side economists advocate?
I. reducing tax rates in order to encourage people to work more
II. providing investment tax credits to stimulate capital formation spending
III. increasing government spending
IV. increasing transfer payments to those who want to be retrained for employment

Accepted Answer

A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I, II, and IV only 
D)  I and II only 
A)  I, II, III, and IV 
B)  I, II, and III only 
C)  I, II, and IV only 
D)  I and II only

Question 9

During a contraction,

Accepted Answer

A)  higher income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. 
B)  higher income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit. 
C)  lower income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. 
D)  lower income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit. 
A)  higher income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. 
B)  higher income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit. 
C)  lower income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. 
D)  lower income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit.

Question 10

Judged by international standards, the national debt of the United States, in terms of its national
Debt as a percentage of GDP is

Accepted Answer

A)  the highest among the developed nations. 
B)  the lowest among the developed nations. 
C)  above average among the developed nations. 
D)  below average among the developed nations. 
A)  the highest among the developed nations. 
B)  the lowest among the developed nations. 
C)  above average among the developed nations. 
D)  below average among the developed nations.

Question 11

Which of the following best explains why a $10 billion increase in transfer payments has a smaller impact on aggregate demand than a $10 billion increase in government purchases?

Accepted Answer

A)  An increase in government purchases can be paid for with a bond issue while transfer payments must be funded by taxes. 
B)  An increase in transfer payments can be paid for by borrowing, but an increase in government purchases must ultimately be funded by tax increases. 
C)  Households save part of an increase in income while the entire increase in government purchases represents additional spending. 
D)  An increase in transfer payments does not create a multiplier effect, but an increase in government purchases does. 
A)  An increase in government purchases can be paid for with a bond issue while transfer payments must be funded by taxes. 
B)  An increase in transfer payments can be paid for by borrowing, but an increase in government purchases must ultimately be funded by tax increases. 
C)  Households save part of an increase in income while the entire increase in government purchases represents additional spending. 
D)  An increase in transfer payments does not create a multiplier effect, but an increase in government purchases does.

Question 12

Supply-side economics is the school of thought that advocates the use of

Accepted Answer

A)  monetary policy to stimulate long-run aggregate supply. 
B)  fiscal policy to stimulate long-run aggregate demand. 
C)  monetary policy to stimulate short-run aggregate demand. 
D)  fiscal policy to stimulate long-run aggregate supply. 
A)  monetary policy to stimulate long-run aggregate supply. 
B)  fiscal policy to stimulate long-run aggregate demand. 
C)  monetary policy to stimulate short-run aggregate demand. 
D)  fiscal policy to stimulate long-run aggregate supply.

Question 13

A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and lower the quantity of bonds the government must sell.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true?

Accepted Answer

A)  Unlike monetary policy, fiscal policy is not subject to lags. 
B)  Like monetary policy, fiscal policy is also subject to the same types of lags. 
C)  In general, fiscal policy lags are much shorter than monetary policy lags. 
D)  Although both monetary and fiscal policies are subject to lags, fiscal policy lags are easier to eliminate. 
A)  Unlike monetary policy, fiscal policy is not subject to lags. 
B)  Like monetary policy, fiscal policy is also subject to the same types of lags. 
C)  In general, fiscal policy lags are much shorter than monetary policy lags. 
D)  Although both monetary and fiscal policies are subject to lags, fiscal policy lags are easier to eliminate.

Question 15

Taxes assessed on firms and employees on wages and salaries earned are called

Accepted Answer

A)  dividend taxes. 
B)  payroll taxes. 
C)  corporate profits taxes. 
D)  earned income taxes. 
A)  dividend taxes. 
B)  payroll taxes. 
C)  corporate profits taxes. 
D)  earned income taxes.

Question 16

Suppose the government institutes a new investment tax credit. This is likely to

Accepted Answer

A)  shift the short-run aggregate supply curve to the right by an amount equal to the amount of tax credit times the spending multiplier. 
B)  shift the aggregate demand curve to the right by an amount equal to the amount of tax credit times the spending multiplier. 
C)  shift the short-run aggregate supply curve to the right by an amount equal to the initial change in investment times the spending multiplier. 
D)  shift the aggregate demand curve to the right by an amount equal to the initial change in investment times the spending multiplier. 
A)  shift the short-run aggregate supply curve to the right by an amount equal to the amount of tax credit times the spending multiplier. 
B)  shift the aggregate demand curve to the right by an amount equal to the amount of tax credit times the spending multiplier. 
C)  shift the short-run aggregate supply curve to the right by an amount equal to the initial change in investment times the spending multiplier. 
D)  shift the aggregate demand curve to the right by an amount equal to the initial change in investment times the spending multiplier.

Question 17

Suppose Congress increases the corporate profit tax rates. This is an example of

Accepted Answer

A)  discretionary fiscal policy of the expansionary variety. 
B)  automatic fiscal policy of the expansionary variety. 
C)  discretionary fiscal policy of the contractionary variety. 
D)  automatic fiscal policy of the contractionary variety. 
A)  discretionary fiscal policy of the expansionary variety. 
B)  automatic fiscal policy of the expansionary variety. 
C)  discretionary fiscal policy of the contractionary variety. 
D)  automatic fiscal policy of the contractionary variety.

Question 18

During a recession, unemployment insurance ensures that

Accepted Answer

A)  firms layoff fewer of its employees than it would if there is no unemployment insurance. 
B)  disposable income increases as GDP falls. 
C)  disposable income does not fall by as much as GDP decreases. 
D)  the marginal propensity to consume increases. 
A)  firms layoff fewer of its employees than it would if there is no unemployment insurance. 
B)  disposable income increases as GDP falls. 
C)  disposable income does not fall by as much as GDP decreases. 
D)  the marginal propensity to consume increases.

Question 19

Expansionary fiscal policy leads to an increase in net exports, all other things unchanged.

Accepted Answer

A) True 
 B)False

Question 20

An expansionary fiscal policy shifts the aggregate demand curve

Accepted Answer

A)  to the right and is used to close an inflationary gap. 
B)  to the right and is used to close a recessionary gap. 
C)  to the left and is used to close an inflationary gap. 
D)  to the left and is used to close a recessionary gap. 
A)  to the right and is used to close an inflationary gap. 
B)  to the right and is used to close a recessionary gap. 
C)  to the left and is used to close an inflationary gap. 
D)  to the left and is used to close a recessionary gap.

Medicaid, welfare payments, and Temporary Assistance to Needy Families are classified as

The bulk of transfer payment spending in the United States is undertaken by

Fiscal policy has a short implementation lag compared to monetary policy.

Which of the following is an example of crowding out?

A contractionary fiscal policy is likely to

Which of the following is an automatic stabilizer? I. inheritance taxes II. government payments to war veterans III. aid to families with dependent children IV. sales taxes

Discretionary fiscal policy refers to

During a contraction,

Judged by international standards, the national debt of the United States, in terms of its national Debt as a percentage of GDP is

Which of the following best explains why a $10 billion increase in transfer payments has a smaller impact on aggregate demand than a $10 billion increase in government purchases?

Supply-side economics is the school of thought that advocates the use of

A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and lower the quantity of bonds the government must sell.

Which of the following statements is true?

Taxes assessed on firms and employees on wages and salaries earned are called

Suppose the government institutes a new investment tax credit. This is likely to

Suppose Congress increases the corporate profit tax rates. This is an example of

During a recession, unemployment insurance ensures that

Expansionary fiscal policy leads to an increase in net exports, all other things unchanged.

An expansionary fiscal policy shifts the aggregate demand curve

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 12: Government and Fiscal Policy

Medicaid, welfare payments, and Temporary Assistance to Needy Families are classified as

The bulk of transfer payment spending in the United States is undertaken by

Fiscal policy has a short implementation lag compared to monetary policy.

Which of the following is an example of crowding out?

A contractionary fiscal policy is likely to

Which of the following is an automatic stabilizer? I. inheritance taxes II. government payments to war veterans III. aid to families with dependent children IV. sales taxes

Discretionary fiscal policy refers to

During a contraction,

Judged by international standards, the national debt of the United States, in terms of its national Debt as a percentage of GDP is

Which of the following best explains why a $10 billion increase in transfer payments has a smaller impact on aggregate demand than a $10 billion increase in government purchases?

Supply-side economics is the school of thought that advocates the use of

A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and lower the quantity of bonds the government must sell.

Which of the following statements is true?

Taxes assessed on firms and employees on wages and salaries earned are called

Suppose the government institutes a new investment tax credit. This is likely to

Suppose Congress increases the corporate profit tax rates. This is an example of

During a recession, unemployment insurance ensures that

Expansionary fiscal policy leads to an increase in net exports, all other things unchanged.

An expansionary fiscal policy shifts the aggregate demand curve

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters