Question 1

Estate and gift taxes account for a very small portion of total tax revenues collected by the federal government because taxes are levied only on large estates.

Accepted Answer

A) True 
 B)False

Question 2

President Obama needs to get Congressional approval to enact measures to boost the economy. The time involved to formulate and get approval for these policies are called

Accepted Answer

A)  inside lags. 
B)  outside lags. 
C)  automatic stabilization. 
D)  crowding in. 
A)  inside lags. 
B)  outside lags. 
C)  automatic stabilization. 
D)  crowding in.

Question 3

Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.

Accepted Answer

A)  is authorized by Congress on an annual basis 
B)  has been authorized by prior law 
C)  is authorized only in times of budget surpluses 
D)  is authorized only in times of budget deficits 
A)  is authorized by Congress on an annual basis 
B)  has been authorized by prior law 
C)  is authorized only in times of budget surpluses 
D)  is authorized only in times of budget deficits

Question 4

Automatic stabilizers

Accepted Answer

A)  minimize fluctuations in the economy. 
B)  must be authorized by the President. 
C)  decrease taxes during expansions. 
D)  increase welfare payments during expansions. 
A)  minimize fluctuations in the economy. 
B)  must be authorized by the President. 
C)  decrease taxes during expansions. 
D)  increase welfare payments during expansions.

Question 5

As a result of an increase in the personal income tax rate, consumers are likely to

Accepted Answer

A)  spend less. 
B)  spend more. 
C)  save more. 
D)  earn more money. 
A)  spend less. 
B)  spend more. 
C)  save more. 
D)  earn more money.

Question 6

When federal government spending exceeds tax revenues, the federal government runs a budget surplus.

Accepted Answer

A) True 
 B)False

Question 7

When federal government spending amounts to less than tax revenues, the federal government runs a budget deficit.

Accepted Answer

A) True 
 B)False

Question 8

Transfer payments are excluded from GDP.

Accepted Answer

A) True 
 B)False

Question 9

The Obama stimulus package included fiscal policy actions designed to assist the economy in its recovery from recession. These fiscal policy actions would include ________ government spending and ________ taxes.

Accepted Answer

A)  increasing; decreasing 
B)  decreasing; increasing 
C)  increasing; Increasing 
D)  decreasing; decreasing 
A)  increasing; decreasing 
B)  decreasing; increasing 
C)  increasing; Increasing 
D)  decreasing; decreasing

Question 10

Which of the following is an example of an automatic stabilizer?

Accepted Answer

A)  Congress authorizes spending increases during a recession. 
B)  Congress increases the tax rate during an expansion. 
C)  More unemployment benefits are paid during a recession. 
D)  Welfare payments decrease during a recession. 
A)  Congress authorizes spending increases during a recession. 
B)  Congress increases the tax rate during an expansion. 
C)  More unemployment benefits are paid during a recession. 
D)  Welfare payments decrease during a recession.

Question 11

A federal budget ________ occurs when the federal government spends more than it collects in taxes.

Accepted Answer

A)  surplus 
B)  deficit 
C)  equilibrium 
D)  ceiling 
A)  surplus 
B)  deficit 
C)  equilibrium 
D)  ceiling

Question 12

Explain how a change in tax rates influences aggregate demand and aggregate supply.

Accepted Answer

A change in tax rates will influence con

Question 13

Even when the Obama administration succeeds with its effort to gain Congressional approval for its stimulus proposals, it will still take time for these policies to actually work. The time it takes for these policies to work is known as

Accepted Answer

A)  inside lags. 
B)  outside lags. 
C)  automatic stabilization. 
D)  crowding out. 
A)  inside lags. 
B)  outside lags. 
C)  automatic stabilization. 
D)  crowding out.

Question 14

Tax cuts aimed at businesses can stimulate

Accepted Answer

A)  social spending. 
B)  private consumption. 
C)  investment spending. 
D)  net exports. 
A)  social spending. 
B)  private consumption. 
C)  investment spending. 
D)  net exports.

Question 15

Policies taken to move the economy closer to potential output

Accepted Answer

A)  must necessarily be expansionary policies. 
B)  must necessarily be contractionary policies. 
C)  are called stabilization policies. 
D)  are lagging policies or automatic policies. 
A)  must necessarily be expansionary policies. 
B)  must necessarily be contractionary policies. 
C)  are called stabilization policies. 
D)  are lagging policies or automatic policies.

Question 16

The Laffer curve illustrates that

Accepted Answer

A)  high tax rates could lead to lower tax revenues if economic activity is severely discouraged. 
B)  lowering tax rates will always increase tax revenues. 
C)  high tax rates would increase tax revenue and increase the labor supply as people work harder to maintain their standard of living. 
D)  lowering tax rates will always decrease tax revenues. 
A)  high tax rates could lead to lower tax revenues if economic activity is severely discouraged. 
B)  lowering tax rates will always increase tax revenues. 
C)  high tax rates would increase tax revenue and increase the labor supply as people work harder to maintain their standard of living. 
D)  lowering tax rates will always decrease tax revenues.

Question 17

Social insurance taxes are paid by wages and investment income.

Accepted Answer

A) True 
 B)False

Question 18

Taxes and transfer payments automatically reduce fluctuations in real GDP and thereby stabilize the economy without any need for decisions from Congress or the White House.

Accepted Answer

A) True 
 B)False

Question 19

Taxes are the only mechanism by which the federal government earns money.

Accepted Answer

A) True 
 B)False

Question 20

Why are transfer payments not included in GDP?

Accepted Answer

A)  The amount is too low to have any effect. 
B)  Unemployment varies and can't be tracked. 
C)  They do not represent payments to those who contributed resources to currently produced goods or services. 
D)  Money companies receive from the government isn't reported. 
A)  The amount is too low to have any effect. 
B)  Unemployment varies and can't be tracked. 
C)  They do not represent payments to those who contributed resources to currently produced goods or services. 
D)  Money companies receive from the government isn't reported.

Estate and gift taxes account for a very small portion of total tax revenues collected by the federal government because taxes are levied only on large estates.

President Obama needs to get Congressional approval to enact measures to boost the economy. The time involved to formulate and get approval for these policies are called

Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.

Automatic stabilizers

As a result of an increase in the personal income tax rate, consumers are likely to

When federal government spending exceeds tax revenues, the federal government runs a budget surplus.

When federal government spending amounts to less than tax revenues, the federal government runs a budget deficit.

Transfer payments are excluded from GDP.

The Obama stimulus package included fiscal policy actions designed to assist the economy in its recovery from recession. These fiscal policy actions would include government spending and taxes.

Which of the following is an example of an automatic stabilizer?

A federal budget ________ occurs when the federal government spends more than it collects in taxes.

Explain how a change in tax rates influences aggregate demand and aggregate supply.

Even when the Obama administration succeeds with its effort to gain Congressional approval for its stimulus proposals, it will still take time for these policies to actually work. The time it takes for these policies to work is known as

Tax cuts aimed at businesses can stimulate

Policies taken to move the economy closer to potential output

The Laffer curve illustrates that

Social insurance taxes are paid by wages and investment income.

Taxes and transfer payments automatically reduce fluctuations in real GDP and thereby stabilize the economy without any need for decisions from Congress or the White House.

Taxes are the only mechanism by which the federal government earns money.

Why are transfer payments not included in GDP?

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

Estate and gift taxes account for a very small portion of total tax revenues collected by the federal government because taxes are levied only on large estates.

President Obama needs to get Congressional approval to enact measures to boost the economy. The time involved to formulate and get approval for these policies are called

Spending on programs that ________, such as Social Security and Medicare, is classified as entitlement and mandatory spending.

Automatic stabilizers

As a result of an increase in the personal income tax rate, consumers are likely to

When federal government spending exceeds tax revenues, the federal government runs a budget surplus.

When federal government spending amounts to less than tax revenues, the federal government runs a budget deficit.

Transfer payments are excluded from GDP.

The Obama stimulus package included fiscal policy actions designed to assist the economy in its recovery from recession. These fiscal policy actions would include ________ government spending and ________ taxes.

Which of the following is an example of an automatic stabilizer?

A federal budget ________ occurs when the federal government spends more than it collects in taxes.

Explain how a change in tax rates influences aggregate demand and aggregate supply.

Even when the Obama administration succeeds with its effort to gain Congressional approval for its stimulus proposals, it will still take time for these policies to actually work. The time it takes for these policies to work is known as

Tax cuts aimed at businesses can stimulate

Policies taken to move the economy closer to potential output

The Laffer curve illustrates that

Social insurance taxes are paid by wages and investment income.

Taxes and transfer payments automatically reduce fluctuations in real GDP and thereby stabilize the economy without any need for decisions from Congress or the White House.

Taxes are the only mechanism by which the federal government earns money.

Why are transfer payments not included in GDP?

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

The Obama stimulus package included fiscal policy actions designed to assist the economy in its recovery from recession. These fiscal policy actions would include government spending and taxes.