Question 1

The so-called negative taxes are better known as

Accepted Answer

A)  government spending. 
B)  transfer payments. 
C)  built-in stabilizers. 
D)  ﬁscal multipliers. 
A)  government spending. 
B)  transfer payments. 
C)  built-in stabilizers. 
D)  ﬁscal multipliers.

Question 2

Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

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 3

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government
Spending by

Accepted Answer

A)  $10 billion. 
B)  $20 billion. 
C)  $31.25 billion. 
D)  $40.50 billion. 
A)  $10 billion. 
B)  $20 billion. 
C)  $31.25 billion. 
D)  $40.50 billion.

Question 4

The more progressive the tax system, the

Accepted Answer

A)  less is the built-in stability for the economy. 
B)  greater is the built-in stability for the economy. 
C)  less is the effect of crowding out on the economy. 
D)  greater is the severity of business ﬂuctuations on the economy. 
A)  less is the built-in stability for the economy. 
B)  greater is the built-in stability for the economy. 
C)  less is the effect of crowding out on the economy. 
D)  greater is the severity of business ﬂuctuations on the economy.

Question 5

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending
Will

Accepted Answer

A)  increase, thus partially offsetting the ﬁscal policy. 
B)  increase, thus partially reinforcing the ﬁscal policy. 
C)  decrease, thus partially offsetting the ﬁscal policy. 
D)  decrease, thus partially reinforcing the ﬁscal policy. 
A)  increase, thus partially offsetting the ﬁscal policy. 
B)  increase, thus partially reinforcing the ﬁscal policy. 
C)  decrease, thus partially offsetting the ﬁscal policy. 
D)  decrease, thus partially reinforcing the ﬁscal policy.

Question 6

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or
increase taxes to pay the debt.

Accepted Answer

A) True 
 B)False

Question 7

The goal of expansionary ﬁscal policy is to increase

Accepted Answer

A)  the price level. 
B)  aggregate supply. 
C)  real GDP. 
D)  unemployment. 
A)  the price level. 
B)  aggregate supply. 
C)  real GDP. 
D)  unemployment.

Question 8

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce
each other.

Accepted Answer

A) True 
 B)False

Question 9

In 2018, interest payments on the public debt, as a percentage of GDP, were about

Accepted Answer

A)  1.8 percent. 
B)  22 percent. 
C)  52 percent. 
D)  12 percent. 
A)  1.8 percent. 
B)  22 percent. 
C)  52 percent. 
D)  12 percent.

Question 10

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

Accepted Answer

In a progressive tax system, the average

Question 11

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It
Can be concluded that from Year 1 to Year 2,

Accepted Answer

A)  real GDP decreased. 
B)  real GDP increased. 
C)  full employment was attained. 
D)  ﬁscal policy became less expansionary. 
A)  real GDP decreased. 
B)  real GDP increased. 
C)  full employment was attained. 
D)  ﬁscal policy became less expansionary.

Question 12

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It
Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

Accepted Answer

A)  proportional. 
B)  progressive. 
C)  contractionary. 
D)  expansionary. 
A)  proportional. 
B)  progressive. 
C)  contractionary. 
D)  expansionary.

Question 13

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 14

Accepted Answer

A)  expansionary ﬁscal policy. 
B)  a major recession. 
C)  contractionary ﬁscal policy. 
D)  severe demand-pull inﬂation. 
A)  expansionary ﬁscal policy. 
B)  a major recession. 
C)  contractionary ﬁscal policy. 
D)  severe demand-pull inﬂation.

Question 15

List the 4 types of U.S. government securities.

Accepted Answer

The four types of government securities

Question 16

What is the Council of Economic Advisers?

Accepted Answer

The Council of Economic Advisors (CEA) i

Question 17

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Accepted Answer

A)  increases during a period of recession, rather than prosperity. 
B)  is primarily for capital-type goods. 
C)  is ﬁnanced by borrowing. 
D)  is ﬁnanced by taxation. 
A)  increases during a period of recession, rather than prosperity. 
B)  is primarily for capital-type goods. 
C)  is ﬁnanced by borrowing. 
D)  is ﬁnanced by taxation.

Question 18

Describe the four substantive issues with the public debt.

Accepted Answer

The four substantive issues are: income

Question 19

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 20

The payment of interest on the public debt in the United States mildly increases income inequality.

Accepted Answer

A) True 
 B)False

The so-called negative taxes are better known as

Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government Spending by

The more progressive the tax system, the

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending Will

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or increase taxes to pay the debt.

The goal of expansionary ﬁscal policy is to increase

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce each other.

In 2018, interest payments on the public debt, as a percentage of GDP, were about

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It Can be concluded that from Year 1 to Year 2,

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

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

List the 4 types of U.S. government securities.

What is the Council of Economic Advisers?

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Describe the four substantive issues with the public debt.

Discretionary ﬁscal policy is often initiated on the advice of the

The payment of interest on the public debt in the United States mildly increases income inequality.

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 so-called negative taxes are better known as

Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government Spending by

The more progressive the tax system, the

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending Will

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or increase taxes to pay the debt.

The goal of expansionary ﬁscal policy is to increase

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce each other.

In 2018, interest payments on the public debt, as a percentage of GDP, were about

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It Can be concluded that from Year 1 to Year 2,

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

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

List the 4 types of U.S. government securities.

What is the Council of Economic Advisers?

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Describe the four substantive issues with the public debt.

Discretionary ﬁscal policy is often initiated on the advice of the

The payment of interest on the public debt in the United States mildly increases income inequality.

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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