Question 1

In 2015, the U.S.public debt was about

Accepted Answer

A) $18.2 trillion. 
B) $16.4 trillion. 
C) $5.3 trillion. 
D) $11.9 trillion. 
A) $18.2 trillion. 
B) $16.4 trillion. 
C) $5.3 trillion. 
D) $11.9 trillion.

Question 2

A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other.

Accepted Answer

A) True 
 B)False

Question 3

Actions by the federal government that decrease the progressivity of the tax system

Accepted Answer

A) decrease the amount of government spending. 
B) increase the effect of automatic stabilizers. 
C) decrease the effect of automatic stabilizers. 
D) increase the multiplier effect. 
A) decrease the amount of government spending. 
B) increase the effect of automatic stabilizers. 
C) decrease the effect of automatic stabilizers. 
D) increase the multiplier effect.

Question 4

The portion of the public debt owed to foreigners does not represent any real economic burden to Americans because we received money from foreigners when we incurred the debt.

Accepted Answer

A) True 
 B)False

Question 5

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

Accepted Answer

A) increasing government spending by $4 billion. 
B) increasing government spending by $40 billion. 
C) decreasing taxes by $4 billion. 
D) increasing taxes by $4 billion. 
A) increasing government spending by $4 billion. 
B) increasing government spending by $40 billion. 
C) decreasing taxes by $4 billion. 
D) increasing taxes by $4 billion.

Question 6

(Last Word) The combined cost of Social Security and Medicare programs was what percentage of U.S.GDP in 2014?

Accepted Answer

A) 8.5 
B) 11.4 
C) 17.2 
D) 12.2 
A) 8.5 
B) 11.4 
C) 17.2 
D) 12.2

Question 7

Built-in stability means that

Accepted Answer

A) an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. 
B) with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus. 
C) Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. 
D) government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year. 
A) an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. 
B) with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus. 
C) Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. 
D) government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

Question 8

The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy.In this case, the crowding-out effect suggests that investment spending will

Accepted Answer

A) increase, thus partially offsetting the fiscal policy. 
B) increase, thus partially reinforcing the fiscal policy. 
C) decrease, thus partially offsetting the fiscal policy. 
D) decrease, thus partially reinforcing the fiscal policy. 
A) increase, thus partially offsetting the fiscal policy. 
B) increase, thus partially reinforcing the fiscal policy. 
C) decrease, thus partially offsetting the fiscal policy. 
D) decrease, thus partially reinforcing the fiscal policy.

Question 9

Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient?

Accepted Answer

A) a $40 billion increase in government spending 
B) a $20 billion tax cut and $20 billion increase in government spending 
C) a $10 billion tax cut and $30 billion increase in government spending 
D) a $40 billion tax cut 
A) a $40 billion increase in government spending 
B) a $20 billion tax cut and $20 billion increase in government spending 
C) a $10 billion tax cut and $30 billion increase in government spending 
D) a $40 billion tax cut

Question 10

If the economy has a cyclically adjusted budget surplus, this means that

Accepted Answer

A) the public sector is exerting an expansionary impact on the economy. 
B) tax revenues would exceed government expenditures if full employment were achieved. 
C) the actual budget is necessarily also in surplus. 
D) the economy is actually operating at full employment. 
A) the public sector is exerting an expansionary impact on the economy. 
B) tax revenues would exceed government expenditures if full employment were achieved. 
C) the actual budget is necessarily also in surplus. 
D) the economy is actually operating at full employment.

Question 11

Which of the following best describes the built-in stabilizers as they function in the United States?

Accepted Answer

A) The size of the multiplier varies inversely with the level of GDP. 
B) Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. 
C) Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. 
D) Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises. 
A) The size of the multiplier varies inversely with the level of GDP. 
B) Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. 
C) Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. 
D) Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.

Question 12

If the budget deficit becomes smaller, then it will cause the public debt to also become smaller.

Accepted Answer

A) True 
 B)False

Question 13

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will

Accepted Answer

A) shift the AD curve to the right. 
B) increase the equilibrium GDP. 
C) not affect the AD curve. 
D) shift the AD curve to the left. 
A) shift the AD curve to the right. 
B) increase the equilibrium GDP. 
C) not affect the AD curve. 
D) shift the AD curve to the left.

Question 14

The average tax rate required to service the public debt is roughly measured by

Accepted Answer

A) the absolute size of the debt. 
B) the debt as a fraction of the GDP. 
C) interest on the debt as a percentage of the GDP. 
D) the ratio of government spending to the GDP. 
A) the absolute size of the debt. 
B) the debt as a fraction of the GDP. 
C) interest on the debt as a percentage of the GDP. 
D) the ratio of government spending to the GDP.

Question 15

The crowding-out effect from government borrowing to finance the public debt is reduced when

Accepted Answer

A) the economy is experiencing a period of high inflation. 
B) the economy is operating at the full-employment level of output. 
C) public investment complements private investment. 
D) public investment substitutes for private investment. 
A) the economy is experiencing a period of high inflation. 
B) the economy is operating at the full-employment level of output. 
C) public investment complements private investment. 
D) public investment substitutes for private investment.

Question 16

The federal budget deficit is found by

Accepted Answer

A) subtracting government tax revenues plus government borrowing from government spending in a particular year. 
B) subtracting government tax revenues from government spending in a particular year. 
C) cumulating the differences between government spending and tax revenues over all years since the nation's founding. 
D) subtracting government revenues from the noninvestment-type government spending in a particular year. 
A) subtracting government tax revenues plus government borrowing from government spending in a particular year. 
B) subtracting government tax revenues from government spending in a particular year. 
C) cumulating the differences between government spending and tax revenues over all years since the nation's founding. 
D) subtracting government revenues from the noninvestment-type government spending in a particular year.

Question 17

In Year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit was $150 billion.In Year 2, the actual budget deficit was $225 billion and the cyclically adjusted deficit was $175 billion.It can be concluded that fiscal policy from Year 1 to Year 2 became more

Accepted Answer

A) proportional. 
B) progressive. 
C) contractionary. 
D) expansionary. 
A) proportional. 
B) progressive. 
C) contractionary. 
D) expansionary.

Question 18

Which of the following historically has not been a significant contributor to the U.S.public debt?

Accepted Answer

A) war financing 
B) tax cuts and expenditure increases in the 1980s 
C) recessions 
D) demand-pull inflation 
A) war financing 
B) tax cuts and expenditure increases in the 1980s 
C) recessions 
D) demand-pull inflation

Question 19

An expansionary fiscal policy is shown as a

Accepted Answer

A) rightward shift in the economy's aggregate demand curve. 
B) movement along an existing aggregate demand curve. 
C) leftward shift in the economy's aggregate supply curve. 
D) leftward shift in the economy's aggregate demand curve. 
A) rightward shift in the economy's aggregate demand curve. 
B) movement along an existing aggregate demand curve. 
C) leftward shift in the economy's aggregate supply curve. 
D) leftward shift in the economy's aggregate demand curve.

Question 20

When Social Security contributions have exceeded payouts in the past, the excess amounts were used to help finance the Federal government's budget deficits.

Accepted Answer

A) True 
 B)False

Exam 33: Fiscal Policy, Deficits, and Debt

In 2015, the U.S.public debt was about

A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other.

Actions by the federal government that decrease the progressivity of the tax system

The portion of the public debt owed to foreigners does not represent any real economic burden to Americans because we received money from foreigners when we incurred the debt.

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

(Last Word) The combined cost of Social Security and Medicare programs was what percentage of U.S.GDP in 2014?

Built-in stability means that

The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy.In this case, the crowding-out effect suggests that investment spending will

Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient?

If the economy has a cyclically adjusted budget surplus, this means that

Which of the following best describes the built-in stabilizers as they function in the United States?

If the budget deficit becomes smaller, then it will cause the public debt to also become smaller.

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will

The average tax rate required to service the public debt is roughly measured by

The crowding-out effect from government borrowing to finance the public debt is reduced when

The federal budget deficit is found by

In Year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit was $150 billion.In Year 2, the actual budget deficit was $225 billion and the cyclically adjusted deficit was $175 billion.It can be concluded that fiscal policy from Year 1 to Year 2 became more

Which of the following historically has not been a significant contributor to the U.S.public debt?

An expansionary fiscal policy is shown as a

When Social Security contributions have exceeded payouts in the past, the excess amounts were used to help finance the Federal government's budget deficits.

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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