Question 1

What are the two tools of fiscal policy that governments can use to affect the level of aggregate demand?

Accepted Answer

A)  government spending and taxation 
B)  government spending and technology improvements 
C)  taxation and controlling imports 
D)  taxation and controlling exports 
A)  government spending and taxation 
B)  government spending and technology improvements 
C)  taxation and controlling imports 
D)  taxation and controlling exports

Question 2

In the United States, the use of fiscal policy tools to stabilize the economy gained prominence during

Accepted Answer

A)  the depression era. 
B)  the Kennedy administration. 
C)  the Reagan administration. 
D)  the Clinton administration. 
A)  the depression era. 
B)  the Kennedy administration. 
C)  the Reagan administration. 
D)  the Clinton administration.

Question 3

Individual income tax is the ________ single component of federal revenue.

Accepted Answer

A)  largest 
B)  second largest 
C)  smallest 
D)  least important 
A)  largest 
B)  second largest 
C)  smallest 
D)  least important

Question 4

The prospect of future deficits

Accepted Answer

A)  encourages government to conduct expansionary fiscal policy. 
B)  would prompt government to vastly expand discretionary spending. 
C)  requires a government to eliminate all entitlement spending. 
D)  limits the ability of government to conduct fiscal policy in the near future. 
A)  encourages government to conduct expansionary fiscal policy. 
B)  would prompt government to vastly expand discretionary spending. 
C)  requires a government to eliminate all entitlement spending. 
D)  limits the ability of government to conduct fiscal policy in the near future.

Question 5

The federal budget has three components. Name them.

Accepted Answer

discretionary spendi

Question 6

Changes in government purchases affect aggregate demand only indirectly through consumption spending.

Accepted Answer

A) True 
 B)False

Question 7

According to supply-side economics, a(n)________ in the tax rate tends to increase the labor supply and ________ aggregate output.

Accepted Answer

A)  decrease; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  increase; increase 
A)  decrease; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  increase; increase

Question 8

Taxes can have an important effect on

Accepted Answer

A)  the labor supply. 
B)  saving. 
C)  economic growth. 
D)  all of the above 
A)  the labor supply. 
B)  saving. 
C)  economic growth. 
D)  all of the above

Question 9

In the United States during the 1930s

Accepted Answer

A)  government spending and taxes both increased, resulting in zero net fiscal expansion. 
B)  government spending and taxes both decreased, resulting in a net fiscal contraction. 
C)  government spending increased and taxes decreased, resulting in a fiscal expansion. 
D)  government spending decreased and taxes increased, resulting in a fiscal contraction. 
A)  government spending and taxes both increased, resulting in zero net fiscal expansion. 
B)  government spending and taxes both decreased, resulting in a net fiscal contraction. 
C)  government spending increased and taxes decreased, resulting in a fiscal expansion. 
D)  government spending decreased and taxes increased, resulting in a fiscal contraction.

Question 10

Fiscal actions to eliminate a recession are likely to decrease the federal budget deficit.

Accepted Answer

A) True 
 B)False

Question 11

Who sets the rules for entitlements when spending is authorized under this category?

Accepted Answer

A)  the President 
B)  the agency involved 
C)  the Congress when it appropriates the spending 
D)  each individual state 
A)  the President 
B)  the agency involved 
C)  the Congress when it appropriates the spending 
D)  each individual state

Question 12

Huge increases in government spending and record low levels of unemployment during the Vietnam War era in the late 1960s led policy makers to fear that

Accepted Answer

A)  the economy was growing too fast, which would increase unemployment. 
B)  the economy was growing too fast, which would increase inflation. 
C)  the economy was slipping into a recession, which would increase unemployment. 
D)  the economy was slipping into a recession, which would increase inflation. 
A)  the economy was growing too fast, which would increase unemployment. 
B)  the economy was growing too fast, which would increase inflation. 
C)  the economy was slipping into a recession, which would increase unemployment. 
D)  the economy was slipping into a recession, which would increase inflation.

Question 13

Corporate profits are taxed by state and local governments, but not by the federal government.

Accepted Answer

A) True 
 B)False

Question 14

In the United States, the temporary tax surcharge of 1968

Accepted Answer

A)  had no impact on consumer spending. 
B)  decreased consumer spending by less than was originally estimated. 
C)  decreased consumer spending by more than was originally estimated. 
D)  actually increased consumer spending. 
A)  had no impact on consumer spending. 
B)  decreased consumer spending by less than was originally estimated. 
C)  decreased consumer spending by more than was originally estimated. 
D)  actually increased consumer spending.

Question 15

Economic advisers who fear that the economy is growing too rapidly would recommend that the government decrease spending and/or increase taxes.

Accepted Answer

A) True 
 B)False

Question 16

President George W. Bush used part of the budget surplus inherited from the Clinton administration to

Accepted Answer

A)  fund tax cuts. 
B)  stimulate the economy that was slowing down following the end of the high-tech investment boom. 
C)  increase government entitlement spending. 
D)  both A and B 
A)  fund tax cuts. 
B)  stimulate the economy that was slowing down following the end of the high-tech investment boom. 
C)  increase government entitlement spending. 
D)  both A and B

Question 17

The government strives to operate at neither a deficit nor surplus budget in order to keep the federal budget

Accepted Answer

A)  balanced. 
B)  equal to inflation. 
C)  in line with the stock market. 
D)  equal to that of other countries. 
A)  balanced. 
B)  equal to inflation. 
C)  in line with the stock market. 
D)  equal to that of other countries.

Question 18

Recall the Application about the relationship between tax rates and tax revenues which was proposed by Yu Juo, one of the twelve wise men who succeeded Confucius in ancient China, to answer the following question(s).
-Recall the Application. The idea regarding the relationship between tax rates and tax revenues proposed by Yu Juo is very similar to the idea proposed by economist

Accepted Answer

A)  Adam Smith. 
B)  Arthur Laffer. 
C)  David Ricardo. 
D)  Ben Bernanke. 
A)  Adam Smith. 
B)  Arthur Laffer. 
C)  David Ricardo. 
D)  Ben Bernanke.

Question 19

Suppose an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will ________ and expenditures on transfer payments will ________, resulting in a budget ________.

Accepted Answer

A)  fall; increase; deficit 
B)  increase; increase; surplus 
C)  fall; fall; deficit 
D)  increase; fall; surplus 
A)  fall; increase; deficit 
B)  increase; increase; surplus 
C)  fall; fall; deficit 
D)  increase; fall; surplus

Question 20

Because the government has so much money, and can print more, it does not need to borrow and therefore rarely pays net interest on debt.

Accepted Answer

A) True 
 B)False

What are the two tools of fiscal policy that governments can use to affect the level of aggregate demand?

In the United States, the use of fiscal policy tools to stabilize the economy gained prominence during

Individual income tax is the ________ single component of federal revenue.

The prospect of future deficits

The federal budget has three components. Name them.

Changes in government purchases affect aggregate demand only indirectly through consumption spending.

According to supply-side economics, a(n) in the tax rate tends to increase the labor supply and aggregate output.

Taxes can have an important effect on

In the United States during the 1930s

Fiscal actions to eliminate a recession are likely to decrease the federal budget deficit.

Who sets the rules for entitlements when spending is authorized under this category?

Huge increases in government spending and record low levels of unemployment during the Vietnam War era in the late 1960s led policy makers to fear that

Corporate profits are taxed by state and local governments, but not by the federal government.

In the United States, the temporary tax surcharge of 1968

Economic advisers who fear that the economy is growing too rapidly would recommend that the government decrease spending and/or increase taxes.

President George W. Bush used part of the budget surplus inherited from the Clinton administration to

The government strives to operate at neither a deficit nor surplus budget in order to keep the federal budget

Suppose an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will and expenditures on transfer payments will , resulting in a budget .

Because the government has so much money, and can print more, it does not need to borrow and therefore rarely pays net interest on debt.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's 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 are the two tools of fiscal policy that governments can use to affect the level of aggregate demand?

In the United States, the use of fiscal policy tools to stabilize the economy gained prominence during

Individual income tax is the ________ single component of federal revenue.

The prospect of future deficits

The federal budget has three components. Name them.

Changes in government purchases affect aggregate demand only indirectly through consumption spending.

According to supply-side economics, a(n)________ in the tax rate tends to increase the labor supply and ________ aggregate output.

Taxes can have an important effect on

In the United States during the 1930s

Fiscal actions to eliminate a recession are likely to decrease the federal budget deficit.

Who sets the rules for entitlements when spending is authorized under this category?

Huge increases in government spending and record low levels of unemployment during the Vietnam War era in the late 1960s led policy makers to fear that

Corporate profits are taxed by state and local governments, but not by the federal government.

In the United States, the temporary tax surcharge of 1968

Economic advisers who fear that the economy is growing too rapidly would recommend that the government decrease spending and/or increase taxes.

President George W. Bush used part of the budget surplus inherited from the Clinton administration to

The government strives to operate at neither a deficit nor surplus budget in order to keep the federal budget

Suppose an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will ________ and expenditures on transfer payments will ________, resulting in a budget ________.

Because the government has so much money, and can print more, it does not need to borrow and therefore rarely pays net interest on debt.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's 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

According to supply-side economics, a(n) in the tax rate tends to increase the labor supply and aggregate output.

Suppose an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will and expenditures on transfer payments will , resulting in a budget .