Question 1

Expansionary fiscal policy includes

Accepted Answer

A)  increasing taxes and increasing government purchases. 
B)  lowering interest rates, decreasing taxes and increasing transfer payments. 
C)  decreasing taxes and increasing government expenditures. 
D)  lowering the interest rates, decreasing taxes and decreasing government spending. 
A)  increasing taxes and increasing government purchases. 
B)  lowering interest rates, decreasing taxes and increasing transfer payments. 
C)  decreasing taxes and increasing government expenditures. 
D)  lowering the interest rates, decreasing taxes and decreasing government spending.

Question 2

The bulk of federal receipts come from

Accepted Answer

A)  property taxes and personal income tax. 
B)  personal income tax and from payroll taxes. 
C)  corporate income taxes and personal income tax. 
D)  personal income tax and property taxes. 
A)  property taxes and personal income tax. 
B)  personal income tax and from payroll taxes. 
C)  corporate income taxes and personal income tax. 
D)  personal income tax and property taxes.

Question 3

Which of the following statements is true about the U.S. national debt?
I. Relative to the level of economic activity, the debt is well below the levels reached during
World War II.
II. The ratio of debt to GDP fell in the last years of the twentieth
Century; it began rising again in 2002 and has risen substantially since the 2008 recession.
III. Judged by international standards, the U.S. national debt relative to its GDP is above average among developed nations.

Accepted Answer

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

Question 4

In the United States, government purchases, as a percentage of real GDP, have generally declined since the 2001.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions .
Exhibit: Fiscal Policy Options  
-(Exhibit: Fiscal Policy Options) Suppose the aggregate demand curve is AD2. All of the following events would more likely bring the economy back to the natural rate of unemployment except

Accepted Answer

A)  the government orders a one-time surcharge of 10% to be added to individual income tax liabilities. 
B)  the government raises business taxes. 
C)  the Federal Reserve sells bonds on the open market. 
D)  the government orders a cut in withholding rates designed to increase disposable income and boost consumption. 
A)  the government orders a one-time surcharge of 10% to be added to individual income tax liabilities. 
B)  the government raises business taxes. 
C)  the Federal Reserve sells bonds on the open market. 
D)  the government orders a cut in withholding rates designed to increase disposable income and boost consumption.

Question 6

Discuss and explain the concepts of the federal deficit and the national debt. How statistically significant are they for the United States as compared to other countries? Explain how the deficits and the debt arise.

Accepted Answer

The federal deficit and the national deb

Question 7

Use the following to answer questions .
Exhibit: Fiscal Policy 1  
-(Exhibit: Fiscal Policy 1) The economy is initially at output level Y1 and there is

Accepted Answer

A)  an inflationary gap. 
B)  a recessionary gap. 
C)  equilibrium at full employment. 
D)  a short-run and a long-run equilibrium. 
A)  an inflationary gap. 
B)  a recessionary gap. 
C)  equilibrium at full employment. 
D)  a short-run and a long-run equilibrium.

Question 8

What is crowding out? How will crowding out dampen the effectiveness of expansionary fiscal policy?

Accepted Answer

Crowding out is an economic concept that

Question 9

All of the following are examples of automatic stabilizers except

Accepted Answer

A)  personal income taxes. 
B)  means-tested federal transfer payments. 
C)  welfare benefits. 
D)  government emergency spending. 
A)  personal income taxes. 
B)  means-tested federal transfer payments. 
C)  welfare benefits. 
D)  government emergency spending.

Question 10

Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. Its GDP in
2013 is $32,000 billion and its budget deficit of $1,600 billion. Compute its debt-GDP ratio at the end of the year.

Accepted Answer

A)  about 5. 0% 
B)  about 20,0% 
C)  about 25.0% 
D)  about 30% 
A)  about 5. 0% 
B)  about 20,0% 
C)  about 25.0% 
D)  about 30%

Question 11

What is an automatic stabilizer?

Accepted Answer

A)  It refers to a discretionary policy that is triggered when actual output is not equal to potential output to improve the economy's performance. 
B)  It refers to a stabilization program that keeps inflation in check automatically. 
C)  It refers to any government program that tends to reduce fluctuations in GDP automatically. 
D)  It refers to a government program that is automatically triggered when the economy enters a recession. 
A)  It refers to a discretionary policy that is triggered when actual output is not equal to potential output to improve the economy's performance. 
B)  It refers to a stabilization program that keeps inflation in check automatically. 
C)  It refers to any government program that tends to reduce fluctuations in GDP automatically. 
D)  It refers to a government program that is automatically triggered when the economy enters a recession.

Question 12

The national debt is the difference between current government expenditures and taxes.

Accepted Answer

A) True 
 B)False

Question 13

An automatic stabilizer tends to increase GDP when it is rising.

Accepted Answer

A) True 
 B)False

Question 14

Crowding out occurs when expansionary fiscal policy leads to

Accepted Answer

A)  a higher money supply and a reduction in net exports. 
B)  a higher money supply and a reduction in the interest rate. 
C)  a higher interest rate and a reduction in private investment. 
D)  a higher price level and a reduction in the money supply. 
A)  a higher money supply and a reduction in net exports. 
B)  a higher money supply and a reduction in the interest rate. 
C)  a higher interest rate and a reduction in private investment. 
D)  a higher price level and a reduction in the money supply.

Question 15

During an economic expansion,

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 16

Payments to households that do not require anything in exchange are called

Accepted Answer

A)  transfer payments. 
B)  government purchases. 
C)  consumption expenditures. 
D)  investment expenditures. 
A)  transfer payments. 
B)  government purchases. 
C)  consumption expenditures. 
D)  investment expenditures.

Question 17

As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by John Taylor on the effect of fiscal policy since the year 2000 suggests that

Accepted Answer

A)  the multiplier effect of fiscal policy is much less than that for monetary policy. 
B)  temporary fiscal policy financed through government borrowing implies a multiplier value between 0.8 and 1.5. 
C)  fiscal policy has little effect on the economy and that the multiplier value is effectively zero. 
D)  statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy. 
A)  the multiplier effect of fiscal policy is much less than that for monetary policy. 
B)  temporary fiscal policy financed through government borrowing implies a multiplier value between 0.8 and 1.5. 
C)  fiscal policy has little effect on the economy and that the multiplier value is effectively zero. 
D)  statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy.

Expansionary fiscal policy includes

The bulk of federal receipts come from

In the United States, government purchases, as a percentage of real GDP, have generally declined since the 2001.

Use the following to answer questions . Exhibit: Fiscal Policy Options -(Exhibit: Fiscal Policy Options) Suppose the aggregate demand curve is AD₂.All of the following events would more likely bring the economy back to the natural rate of unemployment except

Discuss and explain the concepts of the federal deficit and the national debt. How statistically significant are they for the United States as compared to other countries? Explain how the deficits and the debt arise.

Use the following to answer questions . Exhibit: Fiscal Policy 1 -(Exhibit: Fiscal Policy 1) The economy is initially at output level Y₁ and there is

What is crowding out? How will crowding out dampen the effectiveness of expansionary fiscal policy?

All of the following are examples of automatic stabilizers except

Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. Its GDP in 2013 is $32,000 billion and its budget deficit of $1,600 billion. Compute its debt-GDP ratio at the end of the year.

What is an automatic stabilizer?

The national debt is the difference between current government expenditures and taxes.

An automatic stabilizer tends to increase GDP when it is rising.

Crowding out occurs when expansionary fiscal policy leads to

During an economic expansion,

Payments to households that do not require anything in exchange are called

As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by John Taylor on the effect of fiscal policy since the year 2000 suggests that

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

Expansionary fiscal policy includes

The bulk of federal receipts come from

In the United States, government purchases, as a percentage of real GDP, have generally declined since the 2001.

Use the following to answer questions . Exhibit: Fiscal Policy Options -(Exhibit: Fiscal Policy Options) Suppose the aggregate demand curve is AD2. All of the following events would more likely bring the economy back to the natural rate of unemployment except

Discuss and explain the concepts of the federal deficit and the national debt. How statistically significant are they for the United States as compared to other countries? Explain how the deficits and the debt arise.

Use the following to answer questions . Exhibit: Fiscal Policy 1 -(Exhibit: Fiscal Policy 1) The economy is initially at output level Y1 and there is

What is crowding out? How will crowding out dampen the effectiveness of expansionary fiscal policy?

All of the following are examples of automatic stabilizers except

Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. Its GDP in 2013 is $32,000 billion and its budget deficit of $1,600 billion. Compute its debt-GDP ratio at the end of the year.

What is an automatic stabilizer?

The national debt is the difference between current government expenditures and taxes.

An automatic stabilizer tends to increase GDP when it is rising.

Crowding out occurs when expansionary fiscal policy leads to

During an economic expansion,

Payments to households that do not require anything in exchange are called

As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by John Taylor on the effect of fiscal policy since the year 2000 suggests that

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

Use the following to answer questions . Exhibit: Fiscal Policy Options -(Exhibit: Fiscal Policy Options) Suppose the aggregate demand curve is AD₂.All of the following events would more likely bring the economy back to the natural rate of unemployment except

Use the following to answer questions . Exhibit: Fiscal Policy 1 -(Exhibit: Fiscal Policy 1) The economy is initially at output level Y₁ and there is