Question 1

When the economy is hit by spending fluctuations, the government can try to minimize the effects by

Accepted Answer

A)  changing government expenditures on goods. 
B)  changing taxes. 
C)  changing government expenditures on services. 
D)  all of the above 
A)  changing government expenditures on goods. 
B)  changing taxes. 
C)  changing government expenditures on services. 
D)  all of the above

Question 2

Tax revenues ________ during recessions and ________ during expansions.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; expansions 
D)  increase; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  increase; expansions 
D)  increase; increase

Question 3

According to the Laffer Curve, the amount of tax revenue _______when tax rates are ________ and tax rates are ________.

Accepted Answer

A)  increases; low; increased 
B)  increases; high; increased 
C)  decreases; low; increased 
D)  decreases; high; decreased 
A)  increases; low; increased 
B)  increases; high; increased 
C)  decreases; low; increased 
D)  decreases; high; decreased

Question 4

To eliminate the fiscal imbalance the government could

Accepted Answer

A)  lower benefits and lower tax rates. 
B)  increase benefits and increase tax rates. 
C)  lower benefits and increase tax rates. 
D)  increase benefits and lower tax rates 
A)  lower benefits and lower tax rates. 
B)  increase benefits and increase tax rates. 
C)  lower benefits and increase tax rates. 
D)  increase benefits and lower tax rates

Question 5

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

Accepted Answer

A) True 
 B)False

Question 6

If the government has a balanced budget, the total amount of government debt is

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero. 
A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero.

Question 7

-In the above figure, if the economy is initially at point D and government expenditure increases, the economy will

Accepted Answer

A)  move to point C. 
B)  move to point A. 
C)  move to point B. 
D)  stay at point D. 
A)  move to point C. 
B)  move to point A. 
C)  move to point B. 
D)  stay at point D.

Question 8

Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income

Accepted Answer

A)  weakens the incentive to work. 
B)  decreases potential GDP. 
C)  increases potential GDP because people work more to pay the higher taxes. 
D)  Both answers A and B are correct. 
A)  weakens the incentive to work. 
B)  decreases potential GDP. 
C)  increases potential GDP because people work more to pay the higher taxes. 
D)  Both answers A and B are correct.

Question 9

If the government's outlays are $1.5 trillion and its tax revenues are $2.2 trillion, the government is running a budget

Accepted Answer

A)  surplus of $0.7 trillion. 
B)  surplus of $3.7 trillion. 
C)  deficit of $0.7 trillion. 
D)  deficit of $3.7 trillion. 
A)  surplus of $0.7 trillion. 
B)  surplus of $3.7 trillion. 
C)  deficit of $0.7 trillion. 
D)  deficit of $3.7 trillion.

Question 10

A fiscal stimulus is used to increase production and employment.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, an increase in government expenditure will
I. shift the aggregate demand curve rightward.
II. increase real GDP.
III. increase the government expenditure multiplier.
IV. increase the tax multiplier.

Accepted Answer

A)  I and II 
B)  I and III 
C)  I, II and III 
D)  III and IV 
A)  I and II 
B)  I and III 
C)  I, II and III 
D)  III and IV

Question 12

Once supply side effects are taken into account, tax cuts for labor income can change
I. the supply of labor.
II. potential GDP.

Accepted Answer

A)  I only 
B)  I and II 
C)  II only 
D)  neither I nor II 
A)  I only 
B)  I and II 
C)  II only 
D)  neither I nor II

Question 13

In early 2017, economists predicted that the U.S. economy would grow more rapidly than had been projected. If this forecast is correct, then the structural deficit will ________ than had been predicted.

Accepted Answer

A)  shrink more rapidly 
B)  shrink more slowly 
C)  increase more slowly 
D)  None of the above are correct because the growth of the economy does not affect the size of the structural deficit. 
A)  shrink more rapidly 
B)  shrink more slowly 
C)  increase more slowly 
D)  None of the above are correct because the growth of the economy does not affect the size of the structural deficit.

Question 14

By its very definition, every budget deficit is structural in nature.

Accepted Answer

A) True 
 B)False

Question 15

A government incurs a budget deficit when

Accepted Answer

A)  taxes are greater than government outlays. 
B)  taxes are less than government outlays. 
C)  exports are greater than imports. 
D)  exports are less than imports. 
A)  taxes are greater than government outlays. 
B)  taxes are less than government outlays. 
C)  exports are greater than imports. 
D)  exports are less than imports.

Question 16

Changes in which of the following is included as part of fiscal policy?

Accepted Answer

A)  the quantity of money 
B)  the level of interest rates 
C)  monetary policy 
D)  tax rates 
A)  the quantity of money 
B)  the level of interest rates 
C)  monetary policy 
D)  tax rates

Question 17

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

Accepted Answer

A)  the President and his cabinet 
B)  the Federal Reserve Board 
C)  the House of Representatives 
D)  the Senate 
A)  the President and his cabinet 
B)  the Federal Reserve Board 
C)  the House of Representatives 
D)  the Senate

Question 18

The Employment Act of 1946 made it the responsibility of the federal government to

Accepted Answer

A)  balance its budget because that policy would create the maximum level of employment. 
B)  promote maximum employment. 
C)  provide full employment and a stable balance of payments. 
D)  improve the distribution of income. 
A)  balance its budget because that policy would create the maximum level of employment. 
B)  promote maximum employment. 
C)  provide full employment and a stable balance of payments. 
D)  improve the distribution of income.

Question 19

What is the government expenditure multiplier?

Accepted Answer

The government expenditure multiplier is

Question 20

Rank the following federal government outlays from the largest to the smallest.
I. debt interest
II. transfer payments
III. expenditure on goods and services

Accepted Answer

A)  I, II, III 
B)  III, II, I 
C)  III, I, II 
D)  II, III, I 
A)  I, II, III 
B)  III, II, I 
C)  III, I, II 
D)  II, III, I

When the economy is hit by spending fluctuations, the government can try to minimize the effects by

Tax revenues during recessions and during expansions.

According to the Laffer Curve, the amount of tax revenue _when tax rates are and tax rates are __.

To eliminate the fiscal imbalance the government could

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

If the government has a balanced budget, the total amount of government debt is

-In the above figure, if the economy is initially at point D and government expenditure increases, the economy will

Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income

If the government's outlays are $1.5 trillion and its tax revenues are $2.2 trillion, the government is running a budget

A fiscal stimulus is used to increase production and employment.

In the short run, an increase in government expenditure will I. shift the aggregate demand curve rightward. II. increase real GDP. III. increase the government expenditure multiplier. IV. increase the tax multiplier.

Once supply side effects are taken into account, tax cuts for labor income can change I. the supply of labor. II. potential GDP.

In early 2017, economists predicted that the U.S. economy would grow more rapidly than had been projected. If this forecast is correct, then the structural deficit will ________ than had been predicted.

By its very definition, every budget deficit is structural in nature.

A government incurs a budget deficit when

Changes in which of the following is included as part of fiscal policy?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

The Employment Act of 1946 made it the responsibility of the federal government to

What is the government expenditure multiplier?

Rank the following federal government outlays from the largest to the smallest. I. debt interest II. transfer payments III. expenditure on goods and services

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

When the economy is hit by spending fluctuations, the government can try to minimize the effects by

Tax revenues ________ during recessions and ________ during expansions.

According to the Laffer Curve, the amount of tax revenue _______when tax rates are ________ and tax rates are ________.

To eliminate the fiscal imbalance the government could

If tax receipts exactly equaled government outlays in a year, the budget deficit would be zero.

If the government has a balanced budget, the total amount of government debt is

-In the above figure, if the economy is initially at point D and government expenditure increases, the economy will

Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income

If the government's outlays are $1.5 trillion and its tax revenues are $2.2 trillion, the government is running a budget

A fiscal stimulus is used to increase production and employment.

In the short run, an increase in government expenditure will I. shift the aggregate demand curve rightward. II. increase real GDP. III. increase the government expenditure multiplier. IV. increase the tax multiplier.

Once supply side effects are taken into account, tax cuts for labor income can change I. the supply of labor. II. potential GDP.

In early 2017, economists predicted that the U.S. economy would grow more rapidly than had been projected. If this forecast is correct, then the structural deficit will ________ than had been predicted.

By its very definition, every budget deficit is structural in nature.

A government incurs a budget deficit when

Changes in which of the following is included as part of fiscal policy?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

The Employment Act of 1946 made it the responsibility of the federal government to

What is the government expenditure multiplier?

Rank the following federal government outlays from the largest to the smallest. I. debt interest II. transfer payments III. expenditure on goods and services

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Tax revenues during recessions and during expansions.

According to the Laffer Curve, the amount of tax revenue _when tax rates are and tax rates are __.