Question 1

Automatic stabilizers

Accepted Answer

A)  include unemployment benefit payments. 
B)  do not require any legislative decisions by the Congress. 
C)  cushion the decrease in after- tax income and consumption when a recession occurs. 
D)  All of the above answers are correct. 
A)  include unemployment benefit payments. 
B)  do not require any legislative decisions by the Congress. 
C)  cushion the decrease in after- tax income and consumption when a recession occurs. 
D)  All of the above answers are correct.

Question 2

The tax rebates passed by Congress in 2008 to help move the economy more rapidly toward potential GDP are an example of

Accepted Answer

A)  lump- sum taxes. 
B)  contractionary fiscal policy. 
C)  automatic fiscal policy. 
D)  discretionary fiscal policy. 
A)  lump- sum taxes. 
B)  contractionary fiscal policy. 
C)  automatic fiscal policy. 
D)  discretionary fiscal policy.

Question 3

In the U.S. federal government budget, the largest government outlay item in recent years has been

Accepted Answer

A)  personal income taxes. 
B)  interest on the national debt. 
C)  transfer payments. 
D)  government expenditures on goods and services. 
A)  personal income taxes. 
B)  interest on the national debt. 
C)  transfer payments. 
D)  government expenditures on goods and services.

Question 4

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 4?

Accepted Answer

A)  $5 billion 
B)  - $20 billion (The government has net saving rather than debt.) 
C)  $320 billion 
D)  $35 billion 
A)  $5 billion 
B)  - $20 billion (The government has net saving rather than debt.) 
C)  $320 billion 
D)  $35 billion

Question 5

Prior to the Great Depression, the purpose of the federal budget was to _ .

Accepted Answer

A)  finance the activities of the government 
B)  maintain low interest rates 
C)  stabilize the economy 
D)  decrease unemployment 
A)  finance the activities of the government 
B)  maintain low interest rates 
C)  stabilize the economy 
D)  decrease unemployment

Question 6

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

Accepted Answer

A)  3 percent. 
B)  1.34 percent. 
C)  $1,000. 
D)  $343.92. 
A)  3 percent. 
B)  1.34 percent. 
C)  $1,000. 
D)  $343.92.

Question 7

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

Accepted Answer

A recessionary gap occurs when real GDP

Question 8

If real GDP is less than potential GDP, which of the following fiscal policies would increase real GDP?

Accepted Answer

A)  decrease government expenditure and/or increase taxes 
B)  increase government expenditure and/or decrease taxes 
C)  only an increase taxes 
D)  only a decrease government expenditure 
A)  decrease government expenditure and/or increase taxes 
B)  increase government expenditure and/or decrease taxes 
C)  only an increase taxes 
D)  only a decrease government expenditure

Question 9

The structural deficit or surplus is the

Accepted Answer

A)  government budget deficit or surplus that would occur if the economy were at potential GDP. 
B)  difference between actual government outlays and actual government receipts. 
C)  change in national debt that will result from current budgetary policies. 
D)  actual government budget deficit or surplus minus expenditures for capital improvements. 
A)  government budget deficit or surplus that would occur if the economy were at potential GDP. 
B)  difference between actual government outlays and actual government receipts. 
C)  change in national debt that will result from current budgetary policies. 
D)  actual government budget deficit or surplus minus expenditures for capital improvements.

Question 10

The structural surplus measures whether a budget surplus is cyclical or structural.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the government builds a large dam in rural Tennessee. As a result,

Accepted Answer

A)  disposable income in the area decreases. 
B)  consumption expenditures in the area increase. 
C)  induced taxes in the area decrease. 
D)  None of the above answers is correct. 
A)  disposable income in the area decreases. 
B)  consumption expenditures in the area increase. 
C)  induced taxes in the area decrease. 
D)  None of the above answers is correct.

Question 12

Automatic stabilizers

Accepted Answer

A)  cushion the decrease in after- tax income when a recession occurs. 
B)  magnify the increase in after- tax income when a boom occurs. 
C)  require the government use discretionary policy, such as increasing or decreasing government expenditures. 
D)  require the government to balance the budget. 
A)  cushion the decrease in after- tax income when a recession occurs. 
B)  magnify the increase in after- tax income when a boom occurs. 
C)  require the government use discretionary policy, such as increasing or decreasing government expenditures. 
D)  require the government to balance the budget.

Question 13

Discretionary policy requires an act of Congress.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is considered an automatic stabilizer?

Accepted Answer

A)  investment expenditure 
B)  export purchases 
C)  induced tax 
D)  government purchases of military equipment 
A)  investment expenditure 
B)  export purchases 
C)  induced tax 
D)  government purchases of military equipment

Question 15

What is the government expenditure multiplier?

Accepted Answer

The government expenditure multiplier is

Question 16

If tax receipts exactly equaled government outlays in a year, the federal government debt would be zero.

Accepted Answer

A) True 
 B)False

Question 17

The Ricardo- Barro effect implies that a budget deficit will not raise interest rates or reduce investment.

Accepted Answer

A) True 
 B)False

Question 18

By its very definition, every budget deficit is structural in nature.

Accepted Answer

A) True 
 B)False

Question 19

Because of automatic stabilizers, when real GDP increases

Accepted Answer

A)  government expenditures equal tax revenues. 
B)  government expenditures decrease and tax revenues increase. 
C)  government expenditures increase and tax revenues decrease. 
D)  the economy will automatically go to full employment. 
A)  government expenditures equal tax revenues. 
B)  government expenditures decrease and tax revenues increase. 
C)  government expenditures increase and tax revenues decrease. 
D)  the economy will automatically go to full employment.

Question 20

The cyclical deficit is the portion of the deficit

Accepted Answer

A)  that would exist if the economy were at potential real GDP. 
B)  the result of discretionary federal spending. 
C)  created by fluctuations in real GDP. 
D)  that is the result of nondiscretionary federal spending. 
A)  that would exist if the economy were at potential real GDP. 
B)  the result of discretionary federal spending. 
C)  created by fluctuations in real GDP. 
D)  that is the result of nondiscretionary federal spending.

Automatic stabilizers

The tax rebates passed by Congress in 2008 to help move the economy more rapidly toward potential GDP are an example of

In the U.S. federal government budget, the largest government outlay item in recent years has been

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 4?

Prior to the Great Depression, the purpose of the federal budget was to _ .

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

If real GDP is less than potential GDP, which of the following fiscal policies would increase real GDP?

The structural deficit or surplus is the

The structural surplus measures whether a budget surplus is cyclical or structural.

Suppose the government builds a large dam in rural Tennessee. As a result,

Automatic stabilizers

Discretionary policy requires an act of Congress.

Which of the following is considered an automatic stabilizer?

What is the government expenditure multiplier?

If tax receipts exactly equaled government outlays in a year, the federal government debt would be zero.

The Ricardo- Barro effect implies that a budget deficit will not raise interest rates or reduce investment.

By its very definition, every budget deficit is structural in nature.

Because of automatic stabilizers, when real GDP increases

The cyclical deficit is the portion of the deficit

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

Automatic stabilizers

The tax rebates passed by Congress in 2008 to help move the economy more rapidly toward potential GDP are an example of

In the U.S. federal government budget, the largest government outlay item in recent years has been

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 4?

Prior to the Great Depression, the purpose of the federal budget was to _ .

If $1,000 is invested at 3 percent per year for 10 years the investment grows to $1,343.92. This means the present value $1,343.92 at an interest rate of 3 percent 10 years from now is

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

If real GDP is less than potential GDP, which of the following fiscal policies would increase real GDP?

The structural deficit or surplus is the

The structural surplus measures whether a budget surplus is cyclical or structural.

Suppose the government builds a large dam in rural Tennessee. As a result,

Automatic stabilizers

Discretionary policy requires an act of Congress.

Which of the following is considered an automatic stabilizer?

What is the government expenditure multiplier?

If tax receipts exactly equaled government outlays in a year, the federal government debt would be zero.

The Ricardo- Barro effect implies that a budget deficit will not raise interest rates or reduce investment.

By its very definition, every budget deficit is structural in nature.

Because of automatic stabilizers, when real GDP increases

The cyclical deficit is the portion of the deficit

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Filters