Question 1

What is the difference between inside lags and outside lags?

Accepted Answer

Inside lags are the time it takes to formulate policy. For fiscal policy, it is the time between when a problem occurs in the economy and the time when that a policy is implemented.
Outside lags are the time it takes for the policy to work. It occurs between the time when a policy has been implemented and the time when aggregate demand and GDP increases.

Question 2

Figure 10.2
-Refer to Figure 10.2 to answer the question below. Points A, B, and C correspond to a GDP level in Year 2. Suppose that in Year 1 the economy was projected to be at Pt. A by Year 2. Which of the following policies could bring the economy to Point C instead?

Accepted Answer

A)  an ill- timed tax cut 
B)  an ill- timed tax increase 
C)  a correctly timed tax increase 
D)  a correctly timed tax cut 
A)  an ill- timed tax cut 
B)  an ill- timed tax increase 
C)  a correctly timed tax increase 
D)  a correctly timed tax cut C

Question 3

The federal budget works as an automatic economic stabilizer because:

Accepted Answer

A)  it does not require explicit action by the President or Congress. 
B)  budgetary lags are shorter than monetary lags. 
C)  it is activated by a constitutional amendment. 
D)  federal agencies can not be crowded out. 
A)  it does not require explicit action by the President or Congress. 
B)  budgetary lags are shorter than monetary lags. 
C)  it is activated by a constitutional amendment. 
D)  federal agencies can not be crowded out. A

Question 4

Explain why budget deficits are very sensitive to the state of the economy.

Accepted Answer

Since tax collections are largely based

Question 5

Outside lags in fiscal policy tend to take a long time, usually longer than the inside lags.

Accepted Answer

A) True 
 B)False

Question 6

Individual income taxes are largely collected:

Accepted Answer

A)  by a combination of withheld tax and individual tax due filing payments. 
B)  by individual states and then transferred to the federal government. 
C)  through estimated tax payments. 
D)  by April 15th of the same year. 
A)  by a combination of withheld tax and individual tax due filing payments. 
B)  by individual states and then transferred to the federal government. 
C)  through estimated tax payments. 
D)  by April 15th of the same year.

Question 7

An increase in government spending or a decrease in taxes will cause:

Accepted Answer

A)  the aggregate demand curve to the right. 
B)  the SR aggregate supply curve to the right. 
C)  the aggregate demand curve to the left. 
D)  the SR aggregate supply curve to the left. 
A)  the aggregate demand curve to the right. 
B)  the SR aggregate supply curve to the right. 
C)  the aggregate demand curve to the left. 
D)  the SR aggregate supply curve to the left.

Question 8

The key lesson to remember about budget deficits is that during a recession we should focus on:

Accepted Answer

A)  what the monetary policy does to the economy and not on what it does to the deficit. 
B)  what the fiscal policy does to the economy and not on what it does to the deficit. 
C)  what the fiscal policy does to the deficit and not on what it does to the economy. 
D)  what the fiscal policy does to the deficit and not on what it does to the national debt. 
A)  what the monetary policy does to the economy and not on what it does to the deficit. 
B)  what the fiscal policy does to the economy and not on what it does to the deficit. 
C)  what the fiscal policy does to the deficit and not on what it does to the economy. 
D)  what the fiscal policy does to the deficit and not on what it does to the national debt.

Question 9

Customs duties are:

Accepted Answer

A)  taxes levied on nonresidents that enter the United States. 
B)  taxes levied on goods exported from the United States. 
C)  taxes levied on goods imported into the United States. 
D)  tax commitments approved by past sessions of Congress. 
A)  taxes levied on nonresidents that enter the United States. 
B)  taxes levied on goods exported from the United States. 
C)  taxes levied on goods imported into the United States. 
D)  tax commitments approved by past sessions of Congress.

Question 10

Federal discretionary spending

Accepted Answer

A)  requires approval by the Federal Reserve. 
B)  requires the approval of Congress. 
C)  requires approval by the U.S. treasury. 
D)  requires approval by the U.S. Treasury and the president. 
A)  requires approval by the Federal Reserve. 
B)  requires the approval of Congress. 
C)  requires approval by the U.S. treasury. 
D)  requires approval by the U.S. Treasury and the president.

Question 11

Net interest spending consists of:

Accepted Answer

A)  interest payments on commercial debt held by the government. 
B)  interest payments on foreign debt held by the government. 
C)  interest payments on government debt held by the public. 
D)  all of the above 
A)  interest payments on commercial debt held by the government. 
B)  interest payments on foreign debt held by the government. 
C)  interest payments on government debt held by the public. 
D)  all of the above

Question 12

Inside lags associated with fiscal policy are due to all of the following, except:

Accepted Answer

A)  the political infighting involved in approving changes in government spending or taxes. 
B)  the poor and conflicting data available to policymakers. 
C)  the delayed response of the firms to a tax cut. 
D)  the delays in assessing the real state of the economy. 
A)  the political infighting involved in approving changes in government spending or taxes. 
B)  the poor and conflicting data available to policymakers. 
C)  the delayed response of the firms to a tax cut. 
D)  the delays in assessing the real state of the economy.

Question 13

Higher taxes is an example of an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

The federal government runs a budget surplus because:

Accepted Answer

A)  it spends more than what it receives in tax revenues. 
B)  it spends less than what it receives in tax revenues. 
C)  the economy is in a recession. 
D)  it buys back fewer bonds than it issues. 
A)  it spends more than what it receives in tax revenues. 
B)  it spends less than what it receives in tax revenues. 
C)  the economy is in a recession. 
D)  it buys back fewer bonds than it issues.

Question 15

Recall Application 3, "Evaluating the Obama Fiscal Stimulus" to answer the following questions:
-According to the application, President Obama's economic stimulus package in 2009 had no effect on the US economy.

Accepted Answer

A) True 
 B)False

Question 16

The Federal Excise taxes are a major source of revenues for the federal government.

Accepted Answer

A) True 
 B)False

Question 17

Supply- side economists look at the effects of taxes on:

Accepted Answer

A)  aggregate demand. 
B)  a firm's supply curve. 
C)  aggregate supply and aggregate demand. 
D)  aggregate supply. 
A)  aggregate demand. 
B)  a firm's supply curve. 
C)  aggregate supply and aggregate demand. 
D)  aggregate supply.

Question 18

Which of the following government policies is not considered a fiscal policy?

Accepted Answer

A)  government policies regarding money supply in the economy 
B)  government policies regarding taxation 
C)  government policies regarding transfer payments and welfare benefits 
D)  government policies regarding the purchase of goods and services 
A)  government policies regarding money supply in the economy 
B)  government policies regarding taxation 
C)  government policies regarding transfer payments and welfare benefits 
D)  government policies regarding the purchase of goods and services

Question 19

_______ is the school of thought that emphasizes the role of taxes in the supply of output in the economy.

Accepted Answer

A)  Supply- side economics 
B)  Classical economics 
C)  Keynesian economics 
D)  Supply and demand 
A)  Supply- side economics 
B)  Classical economics 
C)  Keynesian economics 
D)  Supply and demand

Question 20

The federal corporate tax is levied on corporate revenue.

Accepted Answer

A) True 
 B)False

What is the difference between inside lags and outside lags?

Figure 10.2 -Refer to Figure 10.2 to answer the question below. Points A, B, and C correspond to a GDP level in Year 2. Suppose that in Year 1 the economy was projected to be at Pt. A by Year 2. Which of the following policies could bring the economy to Point C instead?

The federal budget works as an automatic economic stabilizer because:

Explain why budget deficits are very sensitive to the state of the economy.

Outside lags in fiscal policy tend to take a long time, usually longer than the inside lags.

Individual income taxes are largely collected:

An increase in government spending or a decrease in taxes will cause:

The key lesson to remember about budget deficits is that during a recession we should focus on:

Customs duties are:

Federal discretionary spending

Net interest spending consists of:

Inside lags associated with fiscal policy are due to all of the following, except:

Higher taxes is an example of an expansionary fiscal policy.

The federal government runs a budget surplus because:

Recall Application 3, "Evaluating the Obama Fiscal Stimulus" to answer the following questions: -According to the application, President Obama's economic stimulus package in 2009 had no effect on the US economy.

The Federal Excise taxes are a major source of revenues for the federal government.

Supply- side economists look at the effects of taxes on:

Which of the following government policies is not considered a fiscal policy?

_______ is the school of thought that emphasizes the role of taxes in the supply of output in the economy.

The federal corporate tax is levied on corporate revenue.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 10: Fiscal Policy

What is the difference between inside lags and outside lags?

Figure 10.2 -Refer to Figure 10.2 to answer the question below. Points A, B, and C correspond to a GDP level in Year 2. Suppose that in Year 1 the economy was projected to be at Pt. A by Year 2. Which of the following policies could bring the economy to Point C instead?

The federal budget works as an automatic economic stabilizer because:

Explain why budget deficits are very sensitive to the state of the economy.

Outside lags in fiscal policy tend to take a long time, usually longer than the inside lags.

Individual income taxes are largely collected:

An increase in government spending or a decrease in taxes will cause:

The key lesson to remember about budget deficits is that during a recession we should focus on:

Customs duties are:

Federal discretionary spending

Net interest spending consists of:

Inside lags associated with fiscal policy are due to all of the following, except:

Higher taxes is an example of an expansionary fiscal policy.

The federal government runs a budget surplus because:

Recall Application 3, "Evaluating the Obama Fiscal Stimulus" to answer the following questions: -According to the application, President Obama's economic stimulus package in 2009 had no effect on the US economy.

The Federal Excise taxes are a major source of revenues for the federal government.

Supply- side economists look at the effects of taxes on:

Which of the following government policies is not considered a fiscal policy?

_______ is the school of thought that emphasizes the role of taxes in the supply of output in the economy.

The federal corporate tax is levied on corporate revenue.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters