Question 1

The Great Recession of 2007-09 and the consequent policy response made the

Accepted Answer

A)  actual budget deﬁcit become very close to the cyclically adjusted deﬁcit during that period. 
B)  actual budget deﬁcit shrink during that period. 
C)  cyclically adjusted deﬁcit grow during that period. 
D)  cyclically adjusted budget balance turn positive during that period. 
A)  actual budget deﬁcit become very close to the cyclically adjusted deﬁcit during that period. 
B)  actual budget deﬁcit shrink during that period. 
C)  cyclically adjusted deﬁcit grow during that period. 
D)  cyclically adjusted budget balance turn positive during that period.

Question 2

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then
that means that the government is pursuing an expansionary ﬁscal policy.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The crowding-out effect will be minimal when the economy is in a severe recession.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the diagram. Which tax system has the least built-in stability?

Accepted Answer

A)  $T _ { 4 }$ 
B)  $T _ { 3 }$ 
C)  $T _ { 2 }$ 
D)  $T _ { 1 }$ 
A)  $T _ { 4 }$ 
B)  $T _ { 3 }$ 
C)  $T _ { 2 }$ 
D)  $T _ { 1 }$

Question 6

Which of the following did not contribute directly to the Great Recession?

Accepted Answer

A)  crisis in the mortgage lending market 
B)  the bursting of the dot-com stock market bubble 
C)  freezing credit markets 
D)  pessimism originating from ﬁnancial market turmoil 
A)  crisis in the mortgage lending market 
B)  the bursting of the dot-com stock market bubble 
C)  freezing credit markets 
D)  pessimism originating from ﬁnancial market turmoil

Question 7

In 2018, the Federal Reserve and other U.S. (federal) government agencies held about what percentage of U.S. federal debt?

Accepted Answer

A)  25 percent 
B)  60 percent 
C)  38 percent 
D)  75 percent 
A)  25 percent 
B)  60 percent 
C)  38 percent 
D)  75 percent

Question 8

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 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)  low-interest-rate policy. 
A)  expansionary ﬁscal policy. 
B)  contractionary ﬁscal policy. 
C)  neutral ﬁscal policy. 
D)  low-interest-rate policy.

Question 9

Explain what is meant by a built-in stabilizer and give two examples.

Accepted Answer

A built-in stabilizer is anything that i

Question 10

The real burden of an increase in the public debt

Accepted Answer

A)  may be very small or conceivably zero when the economy is in a severe depression. 
B)  will be smaller when full employment exists than when the economy has large quantities of idle resources. 
C)  can be shifted to future generations if the debt is internally ﬁnanced. 
D)  can best be measured by the dollar increase in the size of the debt. 
A)  may be very small or conceivably zero when the economy is in a severe depression. 
B)  will be smaller when full employment exists than when the economy has large quantities of idle resources. 
C)  can be shifted to future generations if the debt is internally ﬁnanced. 
D)  can best be measured by the dollar increase in the size of the debt.

Question 11

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Accepted Answer

A)  budget lag. 
B)  recognition lag. 
C)  operational lag. 
D)  administrative lag. 
A)  budget lag. 
B)  recognition lag. 
C)  operational lag. 
D)  administrative lag.

Question 12

$$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Actual Budget, Percent of GDP } \
\text { (-deficits, +surpluses) }
\end{array} & \begin{array} { c } 
\text { Cyclically-Adjusted Budget, Percent of GDP } \
\text { (-deficits, +surpluses) }
\end{array} \
\hline 1 & 0 & 0 \
\hline 2 & - 3 & 0 \
\hline 3 & - 5 & - 2 \
\hline 4 & - 2 & - 2 \
\hline 5 & + 2 & + 1 \
\hline
\end{array}$$ Refer to the data for a ?ctional economy. The changes in the budget conditions between Year 2 and 3 best re?ect

Accepted Answer

A)  demand-pull in?ation. 
B)  an expansionary ?scal policy. 
C)  a tax increase. 
D)  a contractionary ?scal policy. 
A)  demand-pull in?ation. 
B)  an expansionary ?scal policy. 
C)  a tax increase. 
D)  a contractionary ?scal policy.

Question 13

State and local governments are limited in their ability to respond to recessions because of

Accepted Answer

A)  local politics and politicians. 
B)  their desire to always run budget surpluses. 
C)  the lack of proper economic research and assistance. 
D)  constitutional and other requirements to balance their budgets. 
A)  local politics and politicians. 
B)  their desire to always run budget surpluses. 
C)  the lack of proper economic research and assistance. 
D)  constitutional and other requirements to balance their budgets.

Question 14

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Accepted Answer

A) True 
 B)False

Question 15

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

Accepted Answer

Discretionary ﬁscal policy refers to cha

Question 16

When current government expenditures exceed current tax revenues 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 has a deﬁcit. 
C)  ﬁscal policy is contractionary. 
D)  the cyclically adjusted budget has a surplus. 
A)  the cyclically adjusted budget has neither a deﬁcit nor a surplus. 
B)  the cyclically adjusted budget has a deﬁcit. 
C)  ﬁscal policy is contractionary. 
D)  the cyclically adjusted budget has a surplus.

Question 17

The cyclically adjusted budget refers to

Accepted Answer

A)  the inﬂationary impact that the automatic stabilizers have in a full-employment economy. 
B)  that portion of a full-employment GDP that is not consumed in the year it is produced. 
C)  the size of the federal government's budgetary surplus or deﬁcit when the economy is operating at full employment. 
D)  the number of workers who are underemployed when the level of unemployment is 4 to 5 percent. 
A)  the inﬂationary impact that the automatic stabilizers have in a full-employment economy. 
B)  that portion of a full-employment GDP that is not consumed in the year it is produced. 
C)  the size of the federal government's budgetary surplus or deﬁcit when the economy is operating at full employment. 
D)  the number of workers who are underemployed when the level of unemployment is 4 to 5 percent.

Question 18

Accepted Answer

A)  a cyclically adjusted budget deﬁcit. 
B)  an actual budget deﬁcit. 
C)  an actual budget surplus. 
D)  neither a surplus nor deﬁcit in the actual budget. 
A)  a cyclically adjusted budget deﬁcit. 
B)  an actual budget deﬁcit. 
C)  an actual budget surplus. 
D)  neither a surplus nor deﬁcit in the actual budget.

Question 19

Which of the following is the best example of public investment?

Accepted Answer

A)  salaries of senators and representatives 
B)  government expenditures on food assistance programs 
C)  construction of highways 
D)  funding of regulatory agencies 
A)  salaries of senators and representatives 
B)  government expenditures on food assistance programs 
C)  construction of highways 
D)  funding of regulatory agencies

Question 20

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.

The Great Recession of 2007-09 and the consequent policy response made the

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then that means that the government is pursuing an expansionary ﬁscal policy.

The crowding-out effect will be minimal when the economy is in a severe recession.

Refer to the diagram. Which tax system has the least built-in stability?

Which of the following did not contribute directly to the Great Recession?

In 2018, the Federal Reserve and other U.S. (federal) government agencies held about what percentage of U.S. federal debt?

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 percent of real GDP. The government is engaging in a(n)

Explain what is meant by a built-in stabilizer and give two examples.

The real burden of an increase in the public debt

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Year Actual Budget, Percent of GDP (-deficits, +surpluses) Cyclically-Adjusted Budget, Percent of GDP (-deficits, +surpluses) 1 0 0 2 -3 0 3 -5 -2 4 -2 -2 5 +2 +1 Refer to the data for a ?ctional economy. The changes in the budget conditions between Year 2 and 3 best re?ect

State and local governments are limited in their ability to respond to recessions because of

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

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

The cyclically adjusted budget refers to

Which of the following is the best example of public investment?

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

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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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Exam 13: Fiscal Policy, Deficits, and Debt

The Great Recession of 2007-09 and the consequent policy response made the

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then that means that the government is pursuing an expansionary ﬁscal policy.

The crowding-out effect will be minimal when the economy is in a severe recession.

Refer to the diagram. Which tax system has the least built-in stability?

Which of the following did not contribute directly to the Great Recession?

In 2018, the Federal Reserve and other U.S. (federal) government agencies held about what percentage of U.S. federal debt?

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 percent of real GDP. The government is engaging in a(n)

Explain what is meant by a built-in stabilizer and give two examples.

The real burden of an increase in the public debt

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Year Actual Budget, Percent of GDP (-deficits, +surpluses) Cyclically-Adjusted Budget, Percent of GDP (-deficits, +surpluses) 1 0 0 2 -3 0 3 -5 -2 4 -2 -2 5 +2 +1 Refer to the data for a ?ctional economy. The changes in the budget conditions between Year 2 and 3 best re?ect

State and local governments are limited in their ability to respond to recessions because of

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

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

The cyclically adjusted budget refers to

Which of the following is the best example of public investment?

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

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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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