Question 1

Which of the following represents the most expansionary fiscal policy?

Accepted Answer

A) a $10 billion tax cut 
B) a $10 billion increase in government spending 
C) a $10 billion tax increase 
D) a $10 billion decrease in government spending 
A) a $10 billion tax cut 
B) a $10 billion increase in government spending 
C) a $10 billion tax increase 
D) a $10 billion decrease in government spending

Question 2

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 $120 billion.To obtain price-level stability under these conditions, the government should

Accepted Answer

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

Question 3

To track the public debt over time and understand its significance to the economy, it is best

Accepted Answer

A) examined relative to budget surpluses. 
B) calculated relative to the money supply. 
C) measured relative to the gross domestic product. 
D) to compare it to imports, exports, and the trade deficit. 
A) examined relative to budget surpluses. 
B) calculated relative to the money supply. 
C) measured relative to the gross domestic product. 
D) to compare it to imports, exports, and the trade deficit.

Question 4

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

Accepted Answer

A) contractionary fiscal policy. 
B) no change in fiscal policy. 
C) expansionary fiscal policy. 
D) countercyclical fiscal policy. 
A) contractionary fiscal policy. 
B) no change in fiscal policy. 
C) expansionary fiscal policy. 
D) countercyclical fiscal policy.

Question 5

The cyclically adjusted budget deficit for the United States

Accepted Answer

A) rose to âˆ'7.1 percent of potential GDP in 2009 but has since declined. 
B) was zero in 2009, but the cyclical deficit created by the recession was âˆ'7.1 percent of potential GDP. 
C) changed to a surplus in 2009. 
D) rose to âˆ'10.1 percent of potential GDP in 2009 but has since declined. 
A) rose to âˆ'7.1 percent of potential GDP in 2009 but has since declined. 
B) was zero in 2009, but the cyclical deficit created by the recession was âˆ'7.1 percent of potential GDP. 
C) changed to a surplus in 2009. 
D) rose to âˆ'10.1 percent of potential GDP in 2009 but has since declined.

Question 6

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

Accepted Answer

A) reduce inflationary pressure caused by oil price increases. 
B) curb the overspending by households that contributed to the Great Recession. 
C) bring the federal budget back into balance. 
D) stimulate aggregate demand and employment. 
A) reduce inflationary pressure caused by oil price increases. 
B) curb the overspending by households that contributed to the Great Recession. 
C) bring the federal budget back into balance. 
D) stimulate aggregate demand and employment.

Question 7

A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.

Accepted Answer

A) True 
 B)False

Question 8

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.

Accepted Answer

A) True 
 B)False

Question 9

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

Accepted Answer

A) True 
 B)False

Question 10

The Social Security program is designed to pay

Accepted Answer

A) current retirees, using funds from their past contributions. 
B) current retirees, using funds from current contributions. 
C) the lower-income groups, using funds collected from high-income groups. 
D) older current workers, using funds from younger current workers. 
A) current retirees, using funds from their past contributions. 
B) current retirees, using funds from current contributions. 
C) the lower-income groups, using funds collected from high-income groups. 
D) older current workers, using funds from younger current workers.

Question 11

Discretionary fiscal policy is often initiated on the advice of the

Accepted Answer

A) Congressional Budget Office. 
B) Council of Economic Advisers. 
C) Joint Economic Committee. 
D) Federal Reserve Board. 
A) Congressional Budget Office. 
B) Council of Economic Advisers. 
C) Joint Economic Committee. 
D) Federal Reserve Board.

Question 12

The portion of the public debt held outside federal agencies and the Federal Reserve is

Accepted Answer

A) larger than the portion held by federal agencies and the Federal Reserve. 
B) smaller than the portion held by federal agencies and the Federal Reserve. 
C) equally split between U.S.and foreign lenders. 
D) all held by foreign lenders. 
A) larger than the portion held by federal agencies and the Federal Reserve. 
B) smaller than the portion held by federal agencies and the Federal Reserve. 
C) equally split between U.S.and foreign lenders. 
D) all held by foreign lenders.

Question 13

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Accepted Answer

A) True 
 B)False

Question 14

An economist who favored expanded government would recommend

Accepted Answer

A) tax cuts during recession and reductions in government spending during inflation. 
B) tax increases during recession and tax cuts during inflation. 
C) tax cuts during recession and tax increases during inflation. 
D) increases in government spending during recession and tax increases during inflation. 
A) tax cuts during recession and reductions in government spending during inflation. 
B) tax increases during recession and tax cuts during inflation. 
C) tax cuts during recession and tax increases during inflation. 
D) increases in government spending during recession and tax increases during inflation.

Question 15

To say that "the U.S.public debt is mostly held internally" is to say that

Accepted Answer

A) only interest payments on the public debt are an economic burden. 
B) official figures understate the size of the public debt. 
C) the bulk of the public debt is owned by U.S.citizens and institutions. 
D) the public debt is equal to the land and building assets owned by the federal government. 
A) only interest payments on the public debt are an economic burden. 
B) official figures understate the size of the public debt. 
C) the bulk of the public debt is owned by U.S.citizens and institutions. 
D) the public debt is equal to the land and building assets owned by the federal government.

Question 16

A budget surplus means that

Accepted Answer

A) government expenditures are greater than revenues in a given year. 
B) government revenues are greater than expenditures in a given year. 
C) a nation's exports are greater than its imports. 
D) a nation's imports are greater than its exports. 
A) government expenditures are greater than revenues in a given year. 
B) government revenues are greater than expenditures in a given year. 
C) a nation's exports are greater than its imports. 
D) a nation's imports are greater than its exports.

Question 17

When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting

Accepted Answer

A) fiscal policy. 
B) incomes policy. 
C) monetary policy. 
D) employment policy. 
A) fiscal policy. 
B) incomes policy. 
C) monetary policy. 
D) employment policy.

Question 18

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n)

Accepted Answer

A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) neutral fiscal policy. 
D) high-interest-rate policy. 
A) expansionary fiscal policy. 
B) contractionary fiscal policy. 
C) neutral fiscal policy. 
D) high-interest-rate policy.

Question 19

In 2015, foreign ownership of the total public debt of the United States was about

Accepted Answer

A) 20 percent. 
B) 34 percent. 
C) 60 percent. 
D) 75 percent. 
A) 20 percent. 
B) 34 percent. 
C) 60 percent. 
D) 75 percent.

Question 20

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

Accepted Answer

A) the opportunity cost of wartime expenditures was borne by the generation that lived during the war. 
B) the Federal government can shift expenditures from military goods to the production of other public goods. 
C) the Federal government has the power to levy taxes to pay its debts. 
D) wartime inflation reduces the relative size of the public debt. 
A) the opportunity cost of wartime expenditures was borne by the generation that lived during the war. 
B) the Federal government can shift expenditures from military goods to the production of other public goods. 
C) the Federal government has the power to levy taxes to pay its debts. 
D) wartime inflation reduces the relative size of the public debt.

Exam 33: Fiscal Policy, Deficits, and Debt

Which of the following represents the most expansionary fiscal policy?

To track the public debt over time and understand its significance to the economy, it is best

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

The cyclically adjusted budget deficit for the United States

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

The Social Security program is designed to pay

Discretionary fiscal policy is often initiated on the advice of the

The portion of the public debt held outside federal agencies and the Federal Reserve is

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

An economist who favored expanded government would recommend

To say that "the U.S.public debt is mostly held internally" is to say that

A budget surplus means that

When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n)

In 2015, foreign ownership of the total public debt of the United States was about

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

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

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The Demand for Resources

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Income Inequality, Poverty, and Discrimination

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An Introduction to Macroeconomics

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Money, Banking, and Financial Institutions

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Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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