Question 1

What is fiscal policy and what are its purposes?

Accepted Answer

Fiscal policy is the use of th

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, this would result in

Accepted Answer

A)  a rightward shift in the supply of labor curve. 
B)  a leftward shift in the supply of labor curve. 
C)  an increase in the tax wedge. 
D)  a movement along the supply of labor curve. 
A)  a rightward shift in the supply of labor curve. 
B)  a leftward shift in the supply of labor curve. 
C)  an increase in the tax wedge. 
D)  a movement along the supply of labor curve.

Question 4

An example of automatic fiscal policy is when

Accepted Answer

A)  Congress passes a law that raises tax rates. 
B)  tax revenues decrease as real GDP decreases. 
C)  Congress decides to cut government expenditure. 
D)  the president drafts a bill to reduce defense spending. 
A)  Congress passes a law that raises tax rates. 
B)  tax revenues decrease as real GDP decreases. 
C)  Congress decides to cut government expenditure. 
D)  the president drafts a bill to reduce defense spending.

Question 5

What is automatic fiscal policy? How does it affect the budget deficit and/or budget surplus during a recession and during an expansion?

Accepted Answer

Automatic fiscal policy are features of

Question 6

A fall in income that results in a decrease in tax revenues is an example of .

Accepted Answer

A)  a recession 
B)  automatic fiscal policy 
C)  discretionary fiscal policy 
D)  needs-tested tax programs 
A)  a recession 
B)  automatic fiscal policy 
C)  discretionary fiscal policy 
D)  needs-tested tax programs

Question 7

Each president can decide when to submit a budget to Congress.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the tax rates as a result of a new tax law passed by Congress is an example of_________

Accepted Answer

A)  increasing the government debt 
B)  needs-tested taxing change. 
C)  increasing the government deficit 
D)  discretionary fiscal policy 
A)  increasing the government debt 
B)  needs-tested taxing change. 
C)  increasing the government deficit 
D)  discretionary fiscal policy

Question 9

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 5?

Accepted Answer

A)  $50 billion 
B)  -$20 billion The government has net saving rather than debt.) 
C)  $35 billion 
D)  $325 billion 
A)  $50 billion 
B)  -$20 billion The government has net saving rather than debt.) 
C)  $35 billion 
D)  $325 billion

Question 10

The government receives tax revenues from several sources. Rank the following sources from largest to the smallest.
I. corporate income taxes
II. personal income taxes
III. Social Security taxes

Accepted Answer

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

Question 11

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

Accepted Answer

Both an increase in government

Question 12

Automatic fiscal policy occurs

Accepted Answer

A)  because government expenditures on goods and services fluctuate with real GDP. 
B)  because tax revenues and transfer payments fluctuate with real GDP. 
C)  because monetary policy is effective. 
D)  when the Congress makes changes to transfer payment programs. 
A)  because government expenditures on goods and services fluctuate with real GDP. 
B)  because tax revenues and transfer payments fluctuate with real GDP. 
C)  because monetary policy is effective. 
D)  when the Congress makes changes to transfer payment programs.

Question 13

If a tax cut increases peopleʹs labor supply, then

Accepted Answer

A)  tax cuts cannot affect aggregate demand. 
B)  tax cuts increase potential GDP. 
C)  tax cuts decrease aggregate demand. 
D)  Both answers A and B are correct. 
A)  tax cuts cannot affect aggregate demand. 
B)  tax cuts increase potential GDP. 
C)  tax cuts decrease aggregate demand. 
D)  Both answers A and B are correct.

Question 14

A budget surplus occurs when government

Accepted Answer

A)  tax revenues exceeds outlays. 
B)  tax revenues equals outlays. 
C)  outlays exceeds tax revenues. 
D)  tax revenues equal social security expenditures. 
A)  tax revenues exceeds outlays. 
B)  tax revenues equals outlays. 
C)  outlays exceeds tax revenues. 
D)  tax revenues equal social security expenditures.

Question 15

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 2?

Accepted Answer

A)  $20 billion 
B)  $250 billion 
C)  $245 billion 
D)  $5 billion 
A)  $20 billion 
B)  $250 billion 
C)  $245 billion 
D)  $5 billion

Question 16

When tax revenues exceed outlays, the government has a__________ , and when outlays exceed tax revenues, the government has a__________ .

Accepted Answer

A)  budget surplus; budget deficit 
B)  budget deficit; budget surplus 
C)  budget debt; budget surplus 
D)  budget surplus; budget debt 
A)  budget surplus; budget deficit 
B)  budget deficit; budget surplus 
C)  budget debt; budget surplus 
D)  budget surplus; budget debt

Question 17

The largest component of the fiscal imbalance is

Accepted Answer

A)  Medicare. 
B)  Defense spending. 
C)  Social Security. 
D)  none of the above 
A)  Medicare. 
B)  Defense spending. 
C)  Social Security. 
D)  none of the above

Question 18

Fiscal policy includes

Accepted Answer

A)  only decisions related to the value of transfer payments and tax revenue. 
B)  only decisions related to government expenditure on goods and services and the value of transfer payments. 
C)  decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue. 
D)  only decisions related to government expenditure on goods and services. 
A)  only decisions related to the value of transfer payments and tax revenue. 
B)  only decisions related to government expenditure on goods and services and the value of transfer payments. 
C)  decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue. 
D)  only decisions related to government expenditure on goods and services.

Question 19

A government incurs a budget deficit when

Accepted Answer

A)  taxes are less than government outlays. 
B)  taxes are greater than government outlays. 
C)  exports are less than imports. 
D)  exports are greater than imports. 
A)  taxes are less than government outlays. 
B)  taxes are greater than government outlays. 
C)  exports are less than imports. 
D)  exports are greater than imports.

Question 20

What are some of the limitations of fiscal policy? Briefly discuss them.

Accepted Answer

One limitation of fiscal policy is the f

What is fiscal policy and what are its purposes?

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

In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, this would result in

An example of automatic fiscal policy is when

What is automatic fiscal policy? How does it affect the budget deficit and/or budget surplus during a recession and during an expansion?

A fall in income that results in a decrease in tax revenues is an example of .

Each president can decide when to submit a budget to Congress.

An increase in the tax rates as a result of a new tax law passed by Congress is an example of_________

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 5?

The government receives tax revenues from several sources. Rank the following sources from largest to the smallest. I. corporate income taxes II. personal income taxes III. Social Security taxes

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

Automatic fiscal policy occurs

If a tax cut increases peopleʹs labor supply, then

A budget surplus occurs when government

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 2?

When tax revenues exceed outlays, the government has a , and when outlays exceed tax revenues, the government has a .

The largest component of the fiscal imbalance is

Fiscal policy includes

A government incurs a budget deficit when

What are some of the limitations of fiscal policy? Briefly discuss them.

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Review

Filters

Exam 13: Fiscal Policy

What is fiscal policy and what are its purposes?

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

In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, this would result in

An example of automatic fiscal policy is when

What is automatic fiscal policy? How does it affect the budget deficit and/or budget surplus during a recession and during an expansion?

A fall in income that results in a decrease in tax revenues is an example of .

Each president can decide when to submit a budget to Congress.

An increase in the tax rates as a result of a new tax law passed by Congress is an example of_________

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 5?

The government receives tax revenues from several sources. Rank the following sources from largest to the smallest. I. corporate income taxes II. personal income taxes III. Social Security taxes

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

Automatic fiscal policy occurs

If a tax cut increases peopleʹs labor supply, then

A budget surplus occurs when government

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 2?

When tax revenues exceed outlays, the government has a__________ , and when outlays exceed tax revenues, the government has a__________ .

The largest component of the fiscal imbalance is

Fiscal policy includes

A government incurs a budget deficit when

What are some of the limitations of fiscal policy? Briefly discuss them.

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Monetary Policy

International Trade Policy

Review

Filters

When tax revenues exceed outlays, the government has a , and when outlays exceed tax revenues, the government has a .