Question 1

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the

Accepted Answer

A) smaller is the economy's MPC. 
B) flatter is the economy's aggregate supply curve. 
C) smaller is the economy's MPS. 
D) less is the economy's built-in stability. 
A) smaller is the economy's MPC. 
B) flatter is the economy's aggregate supply curve. 
C) smaller is the economy's MPS. 
D) less is the economy's built-in stability.

Question 2

One timing problem in using fiscal policy to counter a recession is the "recognition lag" that occurs between the

Accepted Answer

A) start of the recession and the time it takes to recognize that the recession has started. 
B) start of a predicted recession and the actual start of the recession. 
C) time fiscal action is taken and the time that the action has its effect on the economy. 
D) time the need for the fiscal action is recognized and the time that the action is taken. 
A) start of the recession and the time it takes to recognize that the recession has started. 
B) start of a predicted recession and the actual start of the recession. 
C) time fiscal action is taken and the time that the action has its effect on the economy. 
D) time the need for the fiscal action is recognized and the time that the action is taken.

Question 3

The crowding-out effect arises when

Accepted Answer

A) government lends in the money market, thus decreasing interest rates. 
B) government borrows in the money market, thus decreasing interest rates. 
C) government lends in the money market, thus increasing interest rates. 
D) government borrows in the money market, thus causing an increase in interest rates. 
A) government lends in the money market, thus decreasing interest rates. 
B) government borrows in the money market, thus decreasing interest rates. 
C) government lends in the money market, thus increasing interest rates. 
D) government borrows in the money market, thus causing an increase in interest rates.

Question 4

A major concern with the Social Security trust fund is that

Accepted Answer

A) surpluses for Social Security are too large. 
B) the Federal government buys too many government securities. 
C) costs for administering the fund are greater than the current revenue. 
D) the fund will be exhausted in a couple of decades. 
A) surpluses for Social Security are too large. 
B) the Federal government buys too many government securities. 
C) costs for administering the fund are greater than the current revenue. 
D) the fund will be exhausted in a couple of decades.

Question 5

A given reduction in government spending will dampen demand-pull inflation by a greater amount when the

Accepted Answer

A) economy's MPS is large. 
B) economy's aggregate supply curve is flat. 
C) economy's aggregate supply curve is steep. 
D) unemployment rate is high. 
A) economy's MPS is large. 
B) economy's aggregate supply curve is flat. 
C) economy's aggregate supply curve is steep. 
D) unemployment rate is high.

Question 6

Fiscal policy is mainly undertaken by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 7

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases.Full-employment GDP is $200 billion.To obtain full employment under these conditions, the government should

Accepted Answer

A) encourage personal saving by increasing the interest rate on government bonds. 
B) decrease government expenditures. 
C) reduce tax rates and/or increase government spending. 
D) discourage private investment by increasing corporate income taxes. 
A) encourage personal saving by increasing the interest rate on government bonds. 
B) decrease government expenditures. 
C) reduce tax rates and/or increase government spending. 
D) discourage private investment by increasing corporate income taxes.

Question 8

Of the U.S.federal debt held by foreigners in 2015, China held roughly

Accepted Answer

A) 80 percent. 
B) 67 percent. 
C) 50 percent. 
D) 20 percent. 
A) 80 percent. 
B) 67 percent. 
C) 50 percent. 
D) 20 percent.

Question 9

Which one of the following might offset a crowding-out effect of financing a large public debt?

Accepted Answer

A) a decline in net exports 
B) an increase in public investment 
C) a decrease in the money supply 
D) a decline in public investment 
A) a decline in net exports 
B) an increase in public investment 
C) a decrease in the money supply 
D) a decline in public investment

Question 10

The American Recovery and Reinvestment Act of 2009 included mostly

Accepted Answer

A) increases in taxes and in government spending. 
B) decreases in taxes and in government spending. 
C) increases in government spending and decreases in taxes. 
D) decreases in government spending and increases in taxes. 
A) increases in taxes and in government spending. 
B) decreases in taxes and in government spending. 
C) increases in government spending and decreases in taxes. 
D) decreases in government spending and increases in taxes.

Question 11

When current tax revenues exceed current government expenditures and the economy is achieving full employment,

Accepted Answer

A) the cyclically adjusted budget has neither a deficit nor a surplus. 
B) the cyclically adjusted budget may have either a deficit or a surplus. 
C) the cyclically adjusted budget has a surplus. 
D) the government is engaging in an expansionary fiscal policy. 
A) the cyclically adjusted budget has neither a deficit nor a surplus. 
B) the cyclically adjusted budget may have either a deficit or a surplus. 
C) the cyclically adjusted budget has a surplus. 
D) the government is engaging in an expansionary fiscal policy.

Question 12

Expansionary fiscal policy is so named because it involves an expansion of the nation's money supply.

Accepted Answer

A) True 
 B)False

Question 13

An economy is experiencing a high rate of inflation.The government wants to reduce consumption by $36 billion to reduce inflationary pressure.The MPC is 0.75.By how much should the government raise taxes to achieve its objective?

Accepted Answer

A) $6 billion 
B) $9 billion 
C) $12 billion 
D) $16 billion 
A) $6 billion 
B) $9 billion 
C) $12 billion 
D) $16 billion

Question 14

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $100 billion.To achieve full-employment output (exactly), government should

Accepted Answer

A) increase government expenditures by $100 billion. 
B) increase government expenditures by $50 billion. 
C) reduce taxes by $50 billion. 
D) reduce taxes by $200 billion. 
A) increase government expenditures by $100 billion. 
B) increase government expenditures by $50 billion. 
C) reduce taxes by $50 billion. 
D) reduce taxes by $200 billion.

Question 15

Payment of interest on the U.S.public debt

Accepted Answer

A) increases the current domestic standard of living in the United States. 
B) has no effect on the distribution of income. 
C) is thought to decrease income inequality. 
D) is thought to increase income inequality. 
A) increases the current domestic standard of living in the United States. 
B) has no effect on the distribution of income. 
C) is thought to decrease income inequality. 
D) is thought to increase income inequality.

Question 16

The cyclically adjusted budget deficit in an economy is zero.If this economy goes into recession, then the actual government budget will be

Accepted Answer

A) balanced. 
B) in deficit. 
C) in surplus. 
D) expanding. 
A) balanced. 
B) in deficit. 
C) in surplus. 
D) expanding.

Question 17

Discretionary fiscal policy refers to

Accepted Answer

A) any change in government spending or taxes that destabilizes the economy. 
B) the authority that the president has to change personal income tax rates. 
C) intentional changes in taxes and government expenditures made by Congress to stabilize the economy. 
D) the changes in taxes and transfers that occur as GDP changes. 
A) any change in government spending or taxes that destabilizes the economy. 
B) the authority that the president has to change personal income tax rates. 
C) intentional changes in taxes and government expenditures made by Congress to stabilize the economy. 
D) the changes in taxes and transfers that occur as GDP changes.

Question 18

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that

Accepted Answer

A) reinforce changes in GDP. 
B) help offset changes in GDP. 
C) produce a cyclically adjusted budget. 
D) produce a standardized budget. 
A) reinforce changes in GDP. 
B) help offset changes in GDP. 
C) produce a cyclically adjusted budget. 
D) produce a standardized budget.

Question 19

The largest proportion of the U.S.public debt is held by

Accepted Answer

A) the U.S.public (individuals, businesses, financial institutions, and government). 
B) foreign individuals and institutions. 
C) the Federal Reserve System. 
D) U.S.government agencies. 
A) the U.S.public (individuals, businesses, financial institutions, and government). 
B) foreign individuals and institutions. 
C) the Federal Reserve System. 
D) U.S.government agencies.

Question 20

When the economy is at full employment,

Accepted Answer

A) one cannot generalize in comparing the actual and the cyclically adjusted budgets. 
B) the cyclically adjusted budget will show a surplus and the actual budget will show a deficit. 
C) the actual budget will show a surplus and the cyclically adjusted budget will show a deficit. 
D) the actual and the cyclically adjusted budgets will be equal. 
A) one cannot generalize in comparing the actual and the cyclically adjusted budgets. 
B) the cyclically adjusted budget will show a surplus and the actual budget will show a deficit. 
C) the actual budget will show a surplus and the cyclically adjusted budget will show a deficit. 
D) the actual and the cyclically adjusted budgets will be equal.

Exam 33: Fiscal Policy, Deficits, and Debt

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the

One timing problem in using fiscal policy to counter a recession is the "recognition lag" that occurs between the

The crowding-out effect arises when

A major concern with the Social Security trust fund is that

A given reduction in government spending will dampen demand-pull inflation by a greater amount when the

Fiscal policy is mainly undertaken by the Federal Reserve.

Of the U.S.federal debt held by foreigners in 2015, China held roughly

Which one of the following might offset a crowding-out effect of financing a large public debt?

The American Recovery and Reinvestment Act of 2009 included mostly

When current tax revenues exceed current government expenditures and the economy is achieving full employment,

Expansionary fiscal policy is so named because it involves an expansion of the nation's money supply.

An economy is experiencing a high rate of inflation.The government wants to reduce consumption by $36 billion to reduce inflationary pressure.The MPC is 0.75.By how much should the government raise taxes to achieve its objective?

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $100 billion.To achieve full-employment output (exactly), government should

Payment of interest on the U.S.public debt

The cyclically adjusted budget deficit in an economy is zero.If this economy goes into recession, then the actual government budget will be

Discretionary fiscal policy refers to

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that

The largest proportion of the U.S.public debt is held by

When the economy is at full employment,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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