Question 1

Everything else remaining the same, as the economy enters a recession,

Accepted Answer

A) tax revenues rise and interest payments on the debt rise. 
B) government outlays rise and tax revenues fall. 
C) government outlays tend to fall and tax revenues fall. 
D) interest payments on the debt rise and tax revenues fall. 
E) tax revenues and transfer payments rise. 
A) tax revenues rise and interest payments on the debt rise. 
B) government outlays rise and tax revenues fall. 
C) government outlays tend to fall and tax revenues fall. 
D) interest payments on the debt rise and tax revenues fall. 
E) tax revenues and transfer payments rise.

Question 2

If the economy is in a recession and the federal government is running a deficit, then an expansion would

Accepted Answer

A) increase the deficit only if the interest rate rises. 
B) automatically decrease the deficit. 
C) automatically increase the deficit. 
D) automatically balance the budget. 
E) leave the deficit unchanged. 
A) increase the deficit only if the interest rate rises. 
B) automatically decrease the deficit. 
C) automatically increase the deficit. 
D) automatically balance the budget. 
E) leave the deficit unchanged.

Question 3

A structural deficit

Accepted Answer

A) is present only if real GDP is greater than potential. 
B) exists even if real GDP equals potential. 
C) equals the cyclical deficit plus the actual deficit. 
D) occurs when the economy is in a recession. 
E) is greater than a cyclical deficit. 
A) is present only if real GDP is greater than potential. 
B) exists even if real GDP equals potential. 
C) equals the cyclical deficit plus the actual deficit. 
D) occurs when the economy is in a recession. 
E) is greater than a cyclical deficit.

Question 4

Government debt is

Accepted Answer

A) the total amount of government borrowing. 
B) a phenomenon that occurs only during times of war. 
C) equal to revenues minus outlays. 
D) the result of a rising price level. 
E) always increasing. 
A) the total amount of government borrowing. 
B) a phenomenon that occurs only during times of war. 
C) equal to revenues minus outlays. 
D) the result of a rising price level. 
E) always increasing.

Question 5

The cyclical deficit

Accepted Answer

A) exceeds the structural surplus. 
B) is a persistent economic phenomenon. 
C) is an accumulation of the government debt. 
D) occurs when the economy is at full employment. 
E) arises because real GDP does not equal potential GDP. 
A) exceeds the structural surplus. 
B) is a persistent economic phenomenon. 
C) is an accumulation of the government debt. 
D) occurs when the economy is at full employment. 
E) arises because real GDP does not equal potential GDP.

Question 6

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.The budget is balanced when real GDP equals

Accepted Answer

A) $750 billion. 
B) $700 billion. 
C) $550 billion. 
D) $650 billion. 
E) $600 billion. 
A) $750 billion. 
B) $700 billion. 
C) $550 billion. 
D) $650 billion. 
E) $600 billion.

Question 7

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.A discretionary fiscal restraint policy would be shown as

Accepted Answer

A) a movement from left to right along the revenues curve. 
B) an upward shift of the revenues curve. 
C) a movement from left to right along the outlays curve. 
D) an upward shift of the outlays curve. 
E) both A and C 
A) a movement from left to right along the revenues curve. 
B) an upward shift of the revenues curve. 
C) a movement from left to right along the outlays curve. 
D) an upward shift of the outlays curve. 
E) both A and C

Question 8

A decrease in the tax on capital income _______ the real interest rate and _______ investment and economic growth.

Accepted Answer

A) decreases; increases 
B) increases; decreases 
C) decreases; decreases 
D) increases; increases 
E) decreases; does not change 
A) decreases; increases 
B) increases; decreases 
C) decreases; decreases 
D) increases; increases 
E) decreases; does not change

Question 9

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.If a discretionary increase in government expenditure occurs, the structural deficit _______ or the structural surplus _______.

Accepted Answer

A) decreases; decreases 
B) decreases; increases 
C) increases; increases 
D) does not change; does not change 
E) increases; decreases 
A) decreases; decreases 
B) decreases; increases 
C) increases; increases 
D) does not change; does not change 
E) increases; decreases

Question 10

Which one of the following happens automatically if the economy goes into a recession?

Accepted Answer

A) Revenues decrease and government outlays do not change. 
B) Government outlays increase and revenues do not change. 
C) The government budget deficit decreases. 
D) Both government outlays and revenues increase, and the deficit stays the same. 
E) The government budget deficit increases or the government budget surplus decreases. 
A) Revenues decrease and government outlays do not change. 
B) Government outlays increase and revenues do not change. 
C) The government budget deficit decreases. 
D) Both government outlays and revenues increase, and the deficit stays the same. 
E) The government budget deficit increases or the government budget surplus decreases.

Question 11

The government of Ricardia's budget lists the following projected revenues and outlays: $25 million in personal income taxes, $15 million in corporate income taxes, $5 million in indirect taxes, $2 million in investment income, $30 million in transfer payments, $12 million in government expenditure, and $8 million in debt interest.Ricardia has a government budget

Accepted Answer

A) surplus of $3 million. 
B) deficit of $13 million. 
C) surplus of $13 million. 
D) surplus of $57 million. 
E) deficit of $3 million. 
A) surplus of $3 million. 
B) deficit of $13 million. 
C) surplus of $13 million. 
D) surplus of $57 million. 
E) deficit of $3 million.

Question 12

Consider all the effects of fiscal policy.An income tax cut

Accepted Answer

A) increases real GDP but decreases the price level. 
B) increases real GDP and the price level may rise or fall. 
C) increases real GDP but leaves the price level unchanged. 
D) increases both real GDP and the price level. 
E) does not change real GDP or the price level. 
A) increases real GDP but decreases the price level. 
B) increases real GDP and the price level may rise or fall. 
C) increases real GDP but leaves the price level unchanged. 
D) increases both real GDP and the price level. 
E) does not change real GDP or the price level.

Question 13

Everything else remaining the same, as the economy enters an expansion,

Accepted Answer

A) tax revenues fall and transfer payments remain constant. 
B) tax revenues and transfer payments fall. 
C) tax revenues rise and transfer payments fall. 
D) tax revenues and transfer payments rise. 
E) transfer payments and interest on the debt rise. 
A) tax revenues fall and transfer payments remain constant. 
B) tax revenues and transfer payments fall. 
C) tax revenues rise and transfer payments fall. 
D) tax revenues and transfer payments rise. 
E) transfer payments and interest on the debt rise.

Question 14

Choose the statement that is incorrect.

Accepted Answer

A) The debt- to- GDP ratio increased from 1974 through 1997, and then began to decrease. 
B) The federal government debt was 4.4 percent of GDP in 1971. 
C) The debt- to- GDP ratio increased slightly during the 2008- 2009 recession. 
D) As a percentage of real GDP, the federal government debt was greater in 2014 than in 1971. 
E) The government debt increases when the government has a budget deficit. 
A) The debt- to- GDP ratio increased from 1974 through 1997, and then began to decrease. 
B) The federal government debt was 4.4 percent of GDP in 1971. 
C) The debt- to- GDP ratio increased slightly during the 2008- 2009 recession. 
D) As a percentage of real GDP, the federal government debt was greater in 2014 than in 1971. 
E) The government debt increases when the government has a budget deficit.

Question 15

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If real GDP equals $550 billion, the structural deficit is

Accepted Answer

A) zero. 
B) $60 billion. 
C) a surplus of $40 billion. 
D) a surplus of $60 billion. 
E) unknown given the available information. 
A) zero. 
B) $60 billion. 
C) a surplus of $40 billion. 
D) a surplus of $60 billion. 
E) unknown given the available information.

Question 16

Which of the following is a government outlay?

Accepted Answer

A) debt interest 
B) personal income taxes 
C) corporate income taxes 
D) investment income 
E) indirect taxes 
A) debt interest 
B) personal income taxes 
C) corporate income taxes 
D) investment income 
E) indirect taxes

Question 17

During an expansion, revenues

Accepted Answer

A) decrease and government outlays increase. 
B) remain constant and government outlays increase. 
C) increase and government outlays decrease. 
D) and government outlays decrease. 
E) and government outlays increase. 
A) decrease and government outlays increase. 
B) remain constant and government outlays increase. 
C) increase and government outlays decrease. 
D) and government outlays decrease. 
E) and government outlays increase.

Question 18

The economy is in a recession and the recessionary gap is large.Discretionary fiscal policy that might occur is _______.Automatic fiscal policy that might occur is _______.

Accepted Answer

A) a decrease in transfer payments and an increase in taxes with no interference by Parliament; a decrease in government expenditure and an increase in taxes by a decision of Parliament 
B) an increase in government expenditure and a cut in taxes by a decision of Parliament; an increase in transfer payments and a fall in taxes 
C) an increase in transfer payments and a fall in taxes with no interference by Parliament; an increase in government expenditure and a cut in taxes by a decision of Parliament 
D) a decrease in government expenditure and an increase in taxes by a decision of Parliament; a decrease in transfer payments and an increase in taxes with no interference by Parliament 
E) a decrease in the interest rate; an increase in the quantity of money 
A) a decrease in transfer payments and an increase in taxes with no interference by Parliament; a decrease in government expenditure and an increase in taxes by a decision of Parliament 
B) an increase in government expenditure and a cut in taxes by a decision of Parliament; an increase in transfer payments and a fall in taxes 
C) an increase in transfer payments and a fall in taxes with no interference by Parliament; an increase in government expenditure and a cut in taxes by a decision of Parliament 
D) a decrease in government expenditure and an increase in taxes by a decision of Parliament; a decrease in transfer payments and an increase in taxes with no interference by Parliament 
E) a decrease in the interest rate; an increase in the quantity of money

Question 19

According to the Laffer curve, raising the tax rate

Accepted Answer

A) always decreases the amount of tax revenue. 
B) might increase, decrease, or not change the amount of tax revenue. 
C) always increases the amount of tax revenue. 
D) has no effect on the amount of tax revenue. 
E) does not change the amount of tax revenue. 
A) always decreases the amount of tax revenue. 
B) might increase, decrease, or not change the amount of tax revenue. 
C) always increases the amount of tax revenue. 
D) has no effect on the amount of tax revenue. 
E) does not change the amount of tax revenue.

Question 20

Increasing taxes on business and investment _______ short- run aggregate supply and _______ potential GDP.

Accepted Answer

A) increases; decreases 
B) increases; does not change 
C) does not change; does not change 
D) decreases; does not change 
E) decreases; decreases 
A) increases; decreases 
B) increases; does not change 
C) does not change; does not change 
D) decreases; does not change 
E) decreases; decreases

Everything else remaining the same, as the economy enters a recession,

If the economy is in a recession and the federal government is running a deficit, then an expansion would

A structural deficit

Government debt is

The cyclical deficit

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.The budget is balanced when real GDP equals

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.A discretionary fiscal restraint policy would be shown as

A decrease in the tax on capital income _ the real interest rate and _ investment and economic growth.

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.If a discretionary increase in government expenditure occurs, the structural deficit _ or the structural surplus _.

Which one of the following happens automatically if the economy goes into a recession?

Consider all the effects of fiscal policy.An income tax cut

Everything else remaining the same, as the economy enters an expansion,

Choose the statement that is incorrect.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If real GDP equals $550 billion, the structural deficit is

Which of the following is a government outlay?

During an expansion, revenues

The economy is in a recession and the recessionary gap is large.Discretionary fiscal policy that might occur is _.Automatic fiscal policy that might occur is _.

According to the Laffer curve, raising the tax rate

Increasing taxes on business and investment _ short- run aggregate supply and _ potential GDP.

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 Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

Everything else remaining the same, as the economy enters a recession,

If the economy is in a recession and the federal government is running a deficit, then an expansion would

A structural deficit

Government debt is

The cyclical deficit

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.The budget is balanced when real GDP equals

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.A discretionary fiscal restraint policy would be shown as

A decrease in the tax on capital income _______ the real interest rate and _______ investment and economic growth.

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.If a discretionary increase in government expenditure occurs, the structural deficit _______ or the structural surplus _______.

Which one of the following happens automatically if the economy goes into a recession?

Consider all the effects of fiscal policy.An income tax cut

Everything else remaining the same, as the economy enters an expansion,

Choose the statement that is incorrect.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.If real GDP equals $550 billion, the structural deficit is

Which of the following is a government outlay?

During an expansion, revenues

The economy is in a recession and the recessionary gap is large.Discretionary fiscal policy that might occur is _______.Automatic fiscal policy that might occur is _______.

According to the Laffer curve, raising the tax rate

Increasing taxes on business and investment _______ short- run aggregate supply and _______ potential GDP.

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 Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

A decrease in the tax on capital income _ the real interest rate and _ investment and economic growth.

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.If a discretionary increase in government expenditure occurs, the structural deficit _ or the structural surplus _.

The economy is in a recession and the recessionary gap is large.Discretionary fiscal policy that might occur is _.Automatic fiscal policy that might occur is _.

Increasing taxes on business and investment _ short- run aggregate supply and _ potential GDP.