Question 1

Name two actions that a government could take if it wants to implement an expansionary fiscal policy.

Accepted Answer

increase g

Question 2

Entitlements and net interest are the ________ the U.S. federal budget.

Accepted Answer

A)  only two declining components of 
B)  two fastest-growing components of 
C)  two slowest-growing components of 
D)  only two components with negative values in 
A)  only two declining components of 
B)  two fastest-growing components of 
C)  two slowest-growing components of 
D)  only two components with negative values in

Question 3

An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will ________ transfer payments and thereby ________ the income of some households.

Accepted Answer

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

Question 4

Suppose an economy has a balanced federal budget, and a favorable supply shock hits the economy. 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 5

An inside lag is the time period it takes for the stabilization policies to take effect after they have been implemented.

Accepted Answer

A) True 
 B)False

Question 6

What is the largest component of the federal budget?

Accepted Answer

A)  discretionary spending 
B)  entitlements and mandatory spending 
C)  net interest 
D)  defense spending 
A)  discretionary spending 
B)  entitlements and mandatory spending 
C)  net interest 
D)  defense spending

Question 7

In order to ________, a government must increase spending and decrease taxation.

Accepted Answer

A)  increase aggregate demand 
B)  decrease aggregate demand 
C)  increase aggregate supply 
D)  decrease aggregate supply 
A)  increase aggregate demand 
B)  decrease aggregate demand 
C)  increase aggregate supply 
D)  decrease aggregate supply

Question 8

The time it takes for a policy to actually work is known as

Accepted Answer

A)  fiscal policy. 
B)  crowding out. 
C)  inside lags. 
D)  outside lags. 
A)  fiscal policy. 
B)  crowding out. 
C)  inside lags. 
D)  outside lags.

Question 9

Which component of federal spending is included in GDP?

Accepted Answer

A)  net exports 
B)  transfer payments 
C)  government purchases 
D)  capital supply 
A)  net exports 
B)  transfer payments 
C)  government purchases 
D)  capital supply

Question 10

What is meant by the term "outside lags"?

Accepted Answer

Outside lags refers to the tim

Question 11

Using expansionary policies to combat a recession would

Accepted Answer

A)  increase a budget deficit. 
B)  increase a budget surplus. 
C)  decrease discretionary spending. 
D)  increase federal revenue. 
A)  increase a budget deficit. 
B)  increase a budget surplus. 
C)  decrease discretionary spending. 
D)  increase federal revenue.

Question 12

Stabilization policies are policies designed to

Accepted Answer

A)  keep output constant. 
B)  keep prices constant. 
C)  move the economy closer to potential output. 
D)  increase trade. 
A)  keep output constant. 
B)  keep prices constant. 
C)  move the economy closer to potential output. 
D)  increase trade.

Question 13

The fact that it takes time for government to take action, even after a problem has been diagnosed, is one reason for the occurrence of

Accepted Answer

A)  inside lags. 
B)  outside lags. 
C)  crowding out. 
D)  the multiplier effect. 
A)  inside lags. 
B)  outside lags. 
C)  crowding out. 
D)  the multiplier effect.

Question 14

Which of the following is an example of government discretionary spending?

Accepted Answer

A)  Social Security retirement payments 
B)  Medicare benefits for the elderly 
C)  defense spending 
D)  net interest paid on government debt held by the public 
A)  Social Security retirement payments 
B)  Medicare benefits for the elderly 
C)  defense spending 
D)  net interest paid on government debt held by the public

Question 15

A White House proposal to increase infrastructure spending on roads, rail lines and runways is an example of

Accepted Answer

A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  automatic stabilization. 
D)  insourcing policies. 
A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  automatic stabilization. 
D)  insourcing policies.

Question 16

What are the two tools of fiscal policy that governments can use to stabilize an economy?

Accepted Answer

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

Question 17

Special taxes levied on earnings for Social Security and Medicare are called

Accepted Answer

A)  withholding tax on wages. 
B)  social insurance tax. 
C)  unfair tax on low-income families. 
D)  an exception tax for corporations. 
A)  withholding tax on wages. 
B)  social insurance tax. 
C)  unfair tax on low-income families. 
D)  an exception tax for corporations.

Question 18

Expansionary policies are government policies that

Accepted Answer

A)  increase aggregate supply. 
B)  decrease aggregate supply. 
C)  decrease aggregate demand. 
D)  increase aggregate demand. 
A)  increase aggregate supply. 
B)  decrease aggregate supply. 
C)  decrease aggregate demand. 
D)  increase aggregate demand.

Question 19

What is the reason that stabilization policies do not have an immediate effect on an economy?

Accepted Answer

A)  Consumers are slow to catch up on spending. 
B)  There is a time lag for policies to take effect. 
C)  Imports come into the country too fast. 
D)  Exports often are not shipped fast enough. 
A)  Consumers are slow to catch up on spending. 
B)  There is a time lag for policies to take effect. 
C)  Imports come into the country too fast. 
D)  Exports often are not shipped fast enough.

Question 20

Recall the Application about how society will cope with increased demands for entitlement programs to answer the following question(s). This Application addresses the impact of increasing life expectancy and aging populations on the costs of government entitlement programs such as Social Security, Medicare and Medicaid, and examines several possible solutions to the potential problem.
-According to this Application, in the year 2075, the portion of GDP devoted to spending on Social Security, Medicare and Medicaid is expected to be

Accepted Answer

A)  significantly less than the share of GDP devoted to these programs today. 
B)  roughly equal to the total amount of GDP today. 
C)  larger than total federal spending's share of GDP today. 
D)  greater than the consumption spending component's share of GDP in 2075. 
A)  significantly less than the share of GDP devoted to these programs today. 
B)  roughly equal to the total amount of GDP today. 
C)  larger than total federal spending's share of GDP today. 
D)  greater than the consumption spending component's share of GDP in 2075.

Name two actions that a government could take if it wants to implement an expansionary fiscal policy.

Entitlements and net interest are the ________ the U.S. federal budget.

An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will transfer payments and thereby the income of some households.

Suppose an economy has a balanced federal budget, and a favorable supply shock hits the economy. Tax revenues will and expenditures on transfer payments will , resulting in a budget .

An inside lag is the time period it takes for the stabilization policies to take effect after they have been implemented.

What is the largest component of the federal budget?

In order to ________, a government must increase spending and decrease taxation.

The time it takes for a policy to actually work is known as

Which component of federal spending is included in GDP?

What is meant by the term "outside lags"?

Using expansionary policies to combat a recession would

Stabilization policies are policies designed to

The fact that it takes time for government to take action, even after a problem has been diagnosed, is one reason for the occurrence of

Which of the following is an example of government discretionary spending?

A White House proposal to increase infrastructure spending on roads, rail lines and runways is an example of

What are the two tools of fiscal policy that governments can use to stabilize an economy?

Special taxes levied on earnings for Social Security and Medicare are called

Expansionary policies are government policies that

What is the reason that stabilization policies do not have an immediate effect on an economy?

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

Name two actions that a government could take if it wants to implement an expansionary fiscal policy.

Entitlements and net interest are the ________ the U.S. federal budget.

An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will ________ transfer payments and thereby ________ the income of some households.

Suppose an economy has a balanced federal budget, and a favorable supply shock hits the economy. Tax revenues will ________ and expenditures on transfer payments will ________, resulting in a budget ________.

An inside lag is the time period it takes for the stabilization policies to take effect after they have been implemented.

What is the largest component of the federal budget?

In order to ________, a government must increase spending and decrease taxation.

The time it takes for a policy to actually work is known as

Which component of federal spending is included in GDP?

What is meant by the term "outside lags"?

Using expansionary policies to combat a recession would

Stabilization policies are policies designed to

The fact that it takes time for government to take action, even after a problem has been diagnosed, is one reason for the occurrence of

Which of the following is an example of government discretionary spending?

A White House proposal to increase infrastructure spending on roads, rail lines and runways is an example of

What are the two tools of fiscal policy that governments can use to stabilize an economy?

Special taxes levied on earnings for Social Security and Medicare are called

Expansionary policies are government policies that

What is the reason that stabilization policies do not have an immediate effect on an economy?

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

An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will transfer payments and thereby the income of some households.

Suppose an economy has a balanced federal budget, and a favorable supply shock hits the economy. Tax revenues will and expenditures on transfer payments will , resulting in a budget .