Question 1

The economic burden of World War II for the United States was primarily

Accepted Answer

A)  shifted to future generations by bond ﬁnancing. 
B)  borne by the persons who lived during the war period. 
C)  shifted to foreign nations who were defeated during the war. 
D)  borne by the industries that produced military products during the war. 
A)  shifted to future generations by bond ﬁnancing. 
B)  borne by the persons who lived during the war period. 
C)  shifted to foreign nations who were defeated during the war. 
D)  borne by the industries that produced military products during the war.

Question 2

$$\begin{array} { | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Government } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { GDP } \
\hline \text { Year 1 } & \$ 450 & \$ 425 & \$ 2,000 \
\hline \text { Year 2 } & 500 & 450 & 3,000 \
\hline \text { Year 3 } & 600 & 500 & 4,000 \
\hline \text { Year 4 } & 640 & 620 & 5,000 \
\hline \text { Year 5 } & 680 & 580 & 4,800 \
\hline \text { Year 6 } & 600 & 620 & 5,000 \
\hline
\end{array}$$ The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. If year 1 is the ?rst year of this nation's existence and
Year 4 is the present year, the public debt as a percentage of GDP in year 4 is

Accepted Answer

A)  7.5 percent. 
B)  1.39 percent. 
C)  2.5 percent. 
D)  3.9 percent. 
A)  7.5 percent. 
B)  1.39 percent. 
C)  2.5 percent. 
D)  3.9 percent.

Question 3

The actual budget deﬁcit of the federal government in 2018 was about $3.9 percent of GDP. On the basis of this information, it

Accepted Answer

A)  can be concluded that the economy was faced with serious inﬂation in 2018. 
B)  cannot be determined whether the government engaged in expansionary or contractionary ﬁscal policy in 2018. 
C)  can be concluded that ﬁscal policy was contractionary in 2018. 
D)  can be concluded that ﬁscal policy was expansionary in 2018. 
A)  can be concluded that the economy was faced with serious inﬂation in 2018. 
B)  cannot be determined whether the government engaged in expansionary or contractionary ﬁscal policy in 2018. 
C)  can be concluded that ﬁscal policy was contractionary in 2018. 
D)  can be concluded that ﬁscal policy was expansionary in 2018.

Question 4

$$\begin{array} { | c | c | } 
\hline \text { Year } & \text { Deficit it as a \% of GDP } \
\hline 1 & 1.5 \% \
\hline 2 & 1.4 \
\hline 3 & 2.0 \
\hline 4 & 1.8 \
\hline 5 & 1.5 \
\hline
\end{array}$$ The accompanying table shows the cyclically adjusted budget de?cit as a percentage of GDP over a ?ve-year period. In which year was ?scal policy turning more expansionary?

Accepted Answer

A)  Year 2 
B)  Year 3 
C)  Year 4 
D)  Year 5 
A)  Year 2 
B)  Year 3 
C)  Year 4 
D)  Year 5

Question 5

Differentiate between a budget deﬁcit and the public debt.

Accepted Answer

A budget deﬁcit is the amount by which g

Question 6

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

Accepted Answer

A)  A congressional proposal to incur a federal surplus to be used for the retirement of public debt. 
B)  Reductions in agricultural subsidies and veterans' beneﬁts. 
C)  Postponement of a highway construction program. 
D)  Reductions in federal tax rates on personal and corporate income. 
A)  A congressional proposal to incur a federal surplus to be used for the retirement of public debt. 
B)  Reductions in agricultural subsidies and veterans' beneﬁts. 
C)  Postponement of a highway construction program. 
D)  Reductions in federal tax rates on personal and corporate income.

Question 7

List the ﬁve problems, criticisms, or complications that arise in the implementation of ﬁscal policy.

Accepted Answer

The ﬁve problems that arise with impleme

Question 8

The crowding-out effect works through interest rates, and it tends to

Accepted Answer

A)  increase the effectiveness of a tax increase. 
B)  decrease the effectiveness of a tax increase. 
C)  decrease the effectiveness of an increase in government spending. 
D)  increase the effectiveness of an increase in government spending. 
A)  increase the effectiveness of a tax increase. 
B)  decrease the effectiveness of a tax increase. 
C)  decrease the effectiveness of an increase in government spending. 
D)  increase the effectiveness of an increase in government spending.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The cyclically adjusted budget estimates the federal budget deﬁcit or surplus if

Accepted Answer

A)  the rate of inﬂation were zero. 
B)  the economy were at full employment. 
C)  the MPC were zero. 
D)  the government had a balanced budget. 
A)  the rate of inﬂation were zero. 
B)  the economy were at full employment. 
C)  the MPC were zero. 
D)  the government had a balanced budget.

Question 11

Accepted Answer

A)  $AD _ { 0 }$ 
B)  $A D _ { 1 } .$ 
C)  $\mathrm { AD } _ { 2 }$ 
D)  $A D _ { 3 }$ 
A)  $AD _ { 0 }$ 
B)  $A D _ { 1 } .$ 
C)  $\mathrm { AD } _ { 2 }$ 
D)  $A D _ { 3 }$

Question 12

Tax increases and government spending cuts by state governments during recessions often reduce the
expansionary impact of ﬁscal policy by the federal government.

Accepted Answer

A) True 
 B)False

Question 13

Deﬁne ﬁscal policy.

Accepted Answer

Fiscal policy is deﬁned as cha

Question 14

The federal government has a large public debt that it ﬁnances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This
Illustrates the

Accepted Answer

A)  equation-of-exchange effect. 
B)  paradox of thrift. 
C)  crowding-out effect. 
D)  net export effect. 
A)  equation-of-exchange effect. 
B)  paradox of thrift. 
C)  crowding-out effect. 
D)  net export effect.

Question 15

The Medicare trust fund is expected, if current ﬂows continue, to be depleted by 2024.

Accepted Answer

A) True 
 B)False

Question 16

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government ﬁscal policy should be directed toward

Accepted Answer

A)  an equality of tax receipts and government expenditures. 
B)  an excess of tax receipts over government expenditures. 
C)  an excess of government expenditures over tax receipts. 
D)  a reduction of subsidies and transfer payments and an increase in tax rates. 
A)  an equality of tax receipts and government expenditures. 
B)  an excess of tax receipts over government expenditures. 
C)  an excess of government expenditures over tax receipts. 
D)  a reduction of subsidies and transfer payments and an increase in tax rates.

Question 17

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

Accepted Answer

A) True 
 B)False

Question 18

The public debt is the accumulation of all deﬁcits and surpluses that have occurred through time.

Accepted Answer

A) True 
 B)False

Question 19

As of 2018, more than half of the total debt of the U.S. government was owed to foreigners.

Accepted Answer

A) True 
 B)False

Question 20

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2018)?

Accepted Answer

A)  16 percent 
B)  71 percent 
C)  41 percent 
D)  29 percent 
A)  16 percent 
B)  71 percent 
C)  41 percent 
D)  29 percent

The economic burden of World War II for the United States was primarily

The actual budget deﬁcit of the federal government in 2018 was about $3.9 percent of GDP. On the basis of this information, it

Year Deficit it as a \% of GDP 1 1.5\% 2 1.4 3 2.0 4 1.8 5 1.5 The accompanying table shows the cyclically adjusted budget de?cit as a percentage of GDP over a ?ve-year period. In which year was ?scal policy turning more expansionary?

Differentiate between a budget deﬁcit and the public debt.

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

List the ﬁve problems, criticisms, or complications that arise in the implementation of ﬁscal policy.

The crowding-out effect works through interest rates, and it tends to

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

The cyclically adjusted budget estimates the federal budget deﬁcit or surplus if

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of ﬁscal policy by the federal government.

Deﬁne ﬁscal policy.

The federal government has a large public debt that it ﬁnances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This Illustrates the

The Medicare trust fund is expected, if current ﬂows continue, to be depleted by 2024.

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government ﬁscal policy should be directed toward

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

The public debt is the accumulation of all deﬁcits and surpluses that have occurred through time.

As of 2018, more than half of the total debt of the U.S. government was owed to foreigners.

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2018)?

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 economic burden of World War II for the United States was primarily

The actual budget deﬁcit of the federal government in 2018 was about $3.9 percent of GDP. On the basis of this information, it

Year Deficit it as a \% of GDP 1 1.5\% 2 1.4 3 2.0 4 1.8 5 1.5 The accompanying table shows the cyclically adjusted budget de?cit as a percentage of GDP over a ?ve-year period. In which year was ?scal policy turning more expansionary?

Differentiate between a budget deﬁcit and the public debt.

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

List the ﬁve problems, criticisms, or complications that arise in the implementation of ﬁscal policy.

The crowding-out effect works through interest rates, and it tends to

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

The cyclically adjusted budget estimates the federal budget deﬁcit or surplus if

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of ﬁscal policy by the federal government.

Deﬁne ﬁscal policy.

The federal government has a large public debt that it ﬁnances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This Illustrates the

The Medicare trust fund is expected, if current ﬂows continue, to be depleted by 2024.

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government ﬁscal policy should be directed toward

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

The public debt is the accumulation of all deﬁcits and surpluses that have occurred through time.

As of 2018, more than half of the total debt of the U.S. government was owed to foreigners.

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2018)?

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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