Question 1

Taxation and government spending are examples of fiscal policy tools used to stabilize an economy.

Accepted Answer

A) True 
 B)False

Question 2

Expansionary policies are policies designed to

Accepted Answer

A)  increase the level of real GDP. 
B)  reduce the level of real GDP. 
C)  decrease government spending. 
D)  reduce the federal deficit. 
A)  increase the level of real GDP. 
B)  reduce the level of real GDP. 
C)  decrease government spending. 
D)  reduce the federal deficit.

Question 3

A White House proposal to lower business taxes by increasing tax deductions is an example of

Accepted Answer

A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  automatic stabilization. 
D)  progressive taxation. 
A)  expansionary fiscal policy. 
B)  contractionary fiscal policy. 
C)  automatic stabilization. 
D)  progressive taxation.

Question 4

Recall the Application about the success of the 2009 stimulus package to answer the following question(s).
-According to the Application, economist John B. Taylor found that the temporary tax cuts which were a part of the 2009 stimulus package

Accepted Answer

A)  were very successful in stimulating consumption spending. 
B)  did very little to stimulate consumption spending. 
C)  were split very evenly between consumption spending and household saving. 
D)  were primarily used to pay off home mortgage balances. 
A)  were very successful in stimulating consumption spending. 
B)  did very little to stimulate consumption spending. 
C)  were split very evenly between consumption spending and household saving. 
D)  were primarily used to pay off home mortgage balances.

Question 5

Why do most economists believe that the Laffer argument does not apply to broad-based taxes?

Accepted Answer

Most economists believe that the supply

Question 6

An outside lag is the time period it takes economists to formulate a stabilization policy.

Accepted Answer

A) True 
 B)False

Question 7

Contractionary policies are policies designed to

Accepted Answer

A)  increase the level of real GDP. 
B)  reduce the level of real GDP. 
C)  increase government spending. 
D)  increase the federal deficit. 
A)  increase the level of real GDP. 
B)  reduce the level of real GDP. 
C)  increase government spending. 
D)  increase the federal deficit.

Question 8

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called

Accepted Answer

A)  fiscal policy. 
B)  crowding out. 
C)  the multiplier effect. 
D)  entitlement spending. 
A)  fiscal policy. 
B)  crowding out. 
C)  the multiplier effect. 
D)  entitlement spending.

Question 9

Stabilization policies are actions taken to bring the economy closer to full employment.

Accepted Answer

A) True 
 B)False

Question 10

Income taxes are taxes paid on wages and investment income.

Accepted Answer

A) True 
 B)False

Question 11

At the beginning of the Vietnam War, increased military spending in the United States decreased unemployment.

Accepted Answer

A) True 
 B)False

Question 12

In the United States during the 1930s, politicians

Accepted Answer

A)  relied on government spending and taxation to pull the economy out of the depression. 
B)  did not believe in using government spending and taxation because they feared the consequences of budget deficits. 
C)  knew that the depression would eventually subside because of automatic stabilizers. 
D)  deliberately relied on government spending and taxation even though they knew the depression would continue. 
A)  relied on government spending and taxation to pull the economy out of the depression. 
B)  did not believe in using government spending and taxation because they feared the consequences of budget deficits. 
C)  knew that the depression would eventually subside because of automatic stabilizers. 
D)  deliberately relied on government spending and taxation even though they knew the depression would continue.

Question 13

Fearing that the economy was overheating, policymakers instituted a temporary tax surcharge in 1968. This temporary surtax

Accepted Answer

A)  successfully reduced consumption sufficiently to cool down the economy. 
B)  reduced savings but had little effect on consumption. 
C)  drastically reduced both savings and consumption. 
D)  increased savings and reduced consumption. 
A)  successfully reduced consumption sufficiently to cool down the economy. 
B)  reduced savings but had little effect on consumption. 
C)  drastically reduced both savings and consumption. 
D)  increased savings and reduced consumption.

Question 14

The Clinton administration inherited a budget deficit from its predecessor. President Clinton instituted major tax increases that

Accepted Answer

A)  increased the budget deficit during his entire term. 
B)  brought the budget into balance and eventually into a surplus. 
C)  reduced the budget deficit but increased the federal debt. 
D)  reduced the size of the deficit but could not eliminate it. 
A)  increased the budget deficit during his entire term. 
B)  brought the budget into balance and eventually into a surplus. 
C)  reduced the budget deficit but increased the federal debt. 
D)  reduced the size of the deficit but could not eliminate it.

Question 15

When the government conducts activist fiscal policy, what type of spending does it usually use?

Accepted Answer

A)  entitlement and mandatory spending 
B)  net interest spending 
C)  discretionary spending 
D)  strategic spending 
A)  entitlement and mandatory spending 
B)  net interest spending 
C)  discretionary spending 
D)  strategic spending

Question 16

The tax cuts of 2008 were valued at approximately one percent of GDP.

Accepted Answer

A) True 
 B)False

Question 17

When the economy slows down and national income falls, the government will have ________ tax revenue to fund programs.

Accepted Answer

A)  more 
B)  less 
C)  about the same 
D)  a rapid increase in 
A)  more 
B)  less 
C)  about the same 
D)  a rapid increase in

Question 18

Why is it difficult to implement fiscal policies?

Accepted Answer

One reason why fiscal policies are diffi

Question 19

Describe the relationship illustrated by the Laffer curve.

Accepted Answer

The Laffer curve illustrates the relatio

Question 20

An increased federal budget deficit resulting from a recession can actually help stabilize an economy, because corporate profits tend to fall in a recession which, in turn, results in ________ corporate taxes and ________.

Accepted Answer

A)  higher; more tax revenue for the government 
B)  higher; larger profits for businesses 
C)  lower; fewer spending cuts for businesses 
D)  lower; increases in the price level 
A)  higher; more tax revenue for the government 
B)  higher; larger profits for businesses 
C)  lower; fewer spending cuts for businesses 
D)  lower; increases in the price level

Taxation and government spending are examples of fiscal policy tools used to stabilize an economy.

Expansionary policies are policies designed to

A White House proposal to lower business taxes by increasing tax deductions is an example of

Recall the Application about the success of the 2009 stimulus package to answer the following question(s). -According to the Application, economist John B. Taylor found that the temporary tax cuts which were a part of the 2009 stimulus package

Why do most economists believe that the Laffer argument does not apply to broad-based taxes?

An outside lag is the time period it takes economists to formulate a stabilization policy.

Contractionary policies are policies designed to

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called

Stabilization policies are actions taken to bring the economy closer to full employment.

Income taxes are taxes paid on wages and investment income.

At the beginning of the Vietnam War, increased military spending in the United States decreased unemployment.

In the United States during the 1930s, politicians

Fearing that the economy was overheating, policymakers instituted a temporary tax surcharge in 1968. This temporary surtax

The Clinton administration inherited a budget deficit from its predecessor. President Clinton instituted major tax increases that

When the government conducts activist fiscal policy, what type of spending does it usually use?

The tax cuts of 2008 were valued at approximately one percent of GDP.

When the economy slows down and national income falls, the government will have ________ tax revenue to fund programs.

Why is it difficult to implement fiscal policies?

Describe the relationship illustrated by the Laffer curve.

An increased federal budget deficit resulting from a recession can actually help stabilize an economy, because corporate profits tend to fall in a recession which, in turn, results in corporate taxes and .

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

Taxation and government spending are examples of fiscal policy tools used to stabilize an economy.

Expansionary policies are policies designed to

A White House proposal to lower business taxes by increasing tax deductions is an example of

Recall the Application about the success of the 2009 stimulus package to answer the following question(s). -According to the Application, economist John B. Taylor found that the temporary tax cuts which were a part of the 2009 stimulus package

Why do most economists believe that the Laffer argument does not apply to broad-based taxes?

An outside lag is the time period it takes economists to formulate a stabilization policy.

Contractionary policies are policies designed to

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called

Stabilization policies are actions taken to bring the economy closer to full employment.

Income taxes are taxes paid on wages and investment income.

At the beginning of the Vietnam War, increased military spending in the United States decreased unemployment.

In the United States during the 1930s, politicians

Fearing that the economy was overheating, policymakers instituted a temporary tax surcharge in 1968. This temporary surtax

The Clinton administration inherited a budget deficit from its predecessor. President Clinton instituted major tax increases that

When the government conducts activist fiscal policy, what type of spending does it usually use?

The tax cuts of 2008 were valued at approximately one percent of GDP.

When the economy slows down and national income falls, the government will have ________ tax revenue to fund programs.

Why is it difficult to implement fiscal policies?

Describe the relationship illustrated by the Laffer curve.

An increased federal budget deficit resulting from a recession can actually help stabilize an economy, because corporate profits tend to fall in a recession which, in turn, results in ________ corporate taxes and ________.

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, because corporate profits tend to fall in a recession which, in turn, results in corporate taxes and .