Question 1

Built-in stability is exempliﬁed by the fact that with a progressive tax system, net tax revenues decrease
when GDP decreases.

Accepted Answer

A) True 
 B)False

Question 2

One timing problem in using ﬁscal policy to counter a recession is the "operational lag" that occurs between the

Accepted Answer

A)  start of the recession and the time it takes to recognize that the recession has started. 
B)  start of a predicted recession and the actual start of the recession. 
C)  time ﬁscal action is taken and the time that the action has its effect on the economy. 
D)  time the need for the ﬁscal action is recognized and the time that the action is taken. 
A)  start of the recession and the time it takes to recognize that the recession has started. 
B)  start of a predicted recession and the actual start of the recession. 
C)  time ﬁscal action is taken and the time that the action has its effect on the economy. 
D)  time the need for the ﬁscal action is recognized and the time that the action is taken.

Question 3

A major concern with the Social Security trust fund is that

Accepted Answer

A)  surpluses for Social Security are too large. 
B)  the Federal government buys too many government securities. 
C)  costs for administering the fund are greater than the current revenue. 
D)  the fund will be exhausted in a couple of decades. 
A)  surpluses for Social Security are too large. 
B)  the Federal government buys too many government securities. 
C)  costs for administering the fund are greater than the current revenue. 
D)  the fund will be exhausted in a couple of decades.

Question 4

If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by

Accepted Answer

A)  reducing government expenditures by $125 billion. 
B)  reducing government expenditures by $20 billion. 
C)  increasing taxes by $50 billion. 
D)  increasing taxes by $250 billion. 
A)  reducing government expenditures by $125 billion. 
B)  reducing government expenditures by $20 billion. 
C)  increasing taxes by $50 billion. 
D)  increasing taxes by $250 billion.

Question 5

If the MPC in the economy is 0.75, government could shift the aggregate demand curve rightward by
$30 billion by cutting taxes by $10 billion.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the federal government had budget surpluses of $80 billion in year 1 and $120 billion in year 2 but had budget deﬁcits of $10 billion in year 3 and $40 billion in year 4. Also assume that it used its
Budget surpluses to pay down prior years of the public debt. At the end of these four years, the federal
Government's public debt would have

Accepted Answer

A)  increased by $50 billion. 
B)  increased by $150 billion. 
C)  decreased by $200 billion. 
D)  decreased by $150 billion. 
A)  increased by $50 billion. 
B)  increased by $150 billion. 
C)  decreased by $200 billion. 
D)  decreased by $150 billion.

Question 7

With the expenditures programs and the tax system shown in the diagram,

Accepted Answer

A)  the public budget will be expansionary at all GDP levels above K and contractionary at all GDP levels below K. 
B)  the public budget will be a destabilizing force at all levels of GDP. 
C)  deﬁcits will occur at income levels below K, and surpluses above K. 
D)  deﬁcits will occur at income levels below H, and surpluses above H. 
A)  the public budget will be expansionary at all GDP levels above K and contractionary at all GDP levels below K. 
B)  the public budget will be a destabilizing force at all levels of GDP. 
C)  deﬁcits will occur at income levels below K, and surpluses above K. 
D)  deﬁcits will occur at income levels below H, and surpluses above H.

Question 8

Which one of the following might offset a crowding-out effect of ﬁnancing a large public debt?

Accepted Answer

A)  a decline in net exports 
B)  an increase in public investment 
C)  a decrease in the money supply 
D)  a decline in public investment 
A)  a decline in net exports 
B)  an increase in public investment 
C)  a decrease in the money supply 
D)  a decline in public investment

Question 9

What percentage of the U.S. public debt is held by U.S. government agencies and the Federal Reserve (2018)?

Accepted Answer

A)  26 percent 
B)  50 percent 
C)  37 percent 
D)  15 percent 
A)  26 percent 
B)  50 percent 
C)  37 percent 
D)  15 percent

Question 10

The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

Accepted Answer

A) True 
 B)False

Question 11

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneﬁciaries was ______; by 2040 it is projected to be _________.

Accepted Answer

A)  10:1; 3:1 
B)  3:1; 2:1 
C)  5:1; 2:1 
D)  2:1; 3:1 
A)  10:1; 3:1 
B)  3:1; 2:1 
C)  5:1; 2:1 
D)  2:1; 3:1

Question 12

It is possible for an increase in government spending to encourage, instead of crowding out, private
investment.

Accepted Answer

A) True 
 B)False

Question 13

Expansionary ﬁscal policy is so named because it

Accepted Answer

A)  involves an expansion of the nation's money supply. 
B)  necessarily expands the size of government. 
C)  is aimed at achieving greater price stability. 
D)  is designed to expand real GDP. 
A)  involves an expansion of the nation's money supply. 
B)  necessarily expands the size of government. 
C)  is aimed at achieving greater price stability. 
D)  is designed to expand real GDP.

Question 14

In 2018, about ____ percent of the U.S. public debt was held by people and institutions abroad.

Accepted Answer

A)  41 
B)  15 
C)  56 
D)  29 
A)  41 
B)  15 
C)  56 
D)  29

Question 15

Refer to the diagram. If the full-employment level of GDP is A, then it would be appropriate ﬁscal policy for government to

Accepted Answer

A)  decrease spending and increase taxes. 
B)  decrease spending and decrease taxes. 
C)  increase spending and increase taxes. 
D)  increase spending and decrease taxes. 
A)  decrease spending and increase taxes. 
B)  decrease spending and decrease taxes. 
C)  increase spending and increase taxes. 
D)  increase spending and decrease taxes.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The crowding-out effect tends to be stronger when the economy

Accepted Answer

A)  has a lot of excess productive capacity. 
B)  is at, or close to, full employment. 
C)  has a very small net exports or foreign sector. 
D)  is a very open economy with a large foreign sector. 
A)  has a lot of excess productive capacity. 
B)  is at, or close to, full employment. 
C)  has a very small net exports or foreign sector. 
D)  is a very open economy with a large foreign sector.

Question 18

Describe the characteristics of ﬁscal policy in the Great Recession. Was it expansionary or
contractionary?

Accepted Answer

In December 2007, the U.S. economy enter

Question 19

Transfer payments that increase as GDP falls are a type of automatic stabilizer in the economy.

Accepted Answer

A) True 
 B)False

Question 20

If taxation becomes more progressive, the built-in stability in the economy will decrease.

Accepted Answer

A) True 
 B)False

Built-in stability is exempliﬁed by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.

One timing problem in using ﬁscal policy to counter a recession is the "operational lag" that occurs between the

A major concern with the Social Security trust fund is that

If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by

If the MPC in the economy is 0.75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.

With the expenditures programs and the tax system shown in the diagram,

Which one of the following might offset a crowding-out effect of ﬁnancing a large public debt?

What percentage of the U.S. public debt is held by U.S. government agencies and the Federal Reserve (2018)?

The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneﬁciaries was ; by 2040 it is projected to be ___.

It is possible for an increase in government spending to encourage, instead of crowding out, private investment.

Expansionary ﬁscal policy is so named because it

In 2018, about ____ percent of the U.S. public debt was held by people and institutions abroad.

Refer to the diagram. If the full-employment level of GDP is A, then it would be appropriate ﬁscal policy for government to

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

The crowding-out effect tends to be stronger when the economy

Describe the characteristics of ﬁscal policy in the Great Recession. Was it expansionary or contractionary?

Transfer payments that increase as GDP falls are a type of automatic stabilizer in the economy.

If taxation becomes more progressive, the built-in stability in the economy will decrease.

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

Filters

Exam 13: Fiscal Policy, Deficits, and Debt

Built-in stability is exempliﬁed by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.

One timing problem in using ﬁscal policy to counter a recession is the "operational lag" that occurs between the

A major concern with the Social Security trust fund is that

If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by

If the MPC in the economy is 0.75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.

With the expenditures programs and the tax system shown in the diagram,

Which one of the following might offset a crowding-out effect of ﬁnancing a large public debt?

What percentage of the U.S. public debt is held by U.S. government agencies and the Federal Reserve (2018)?

The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneﬁciaries was ______; by 2040 it is projected to be _________.

It is possible for an increase in government spending to encourage, instead of crowding out, private investment.

Expansionary ﬁscal policy is so named because it

In 2018, about ____ percent of the U.S. public debt was held by people and institutions abroad.

Refer to the diagram. If the full-employment level of GDP is A, then it would be appropriate ﬁscal policy for government to

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

The crowding-out effect tends to be stronger when the economy

Describe the characteristics of ﬁscal policy in the Great Recession. Was it expansionary or contractionary?

Transfer payments that increase as GDP falls are a type of automatic stabilizer in the economy.

If taxation becomes more progressive, the built-in stability in the economy will decrease.

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

Filters

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneﬁciaries was ; by 2040 it is projected to be ___.