Question 1

Through the start of 2009, Social Security revenues exceeded payouts, and the excess inﬂow was used to buy

Accepted Answer

A)  public lands. 
B)  gold certiﬁcates. 
C)  foreign securities. 
D)  Treasury securities. 
A)  public lands. 
B)  gold certiﬁcates. 
C)  foreign securities. 
D)  Treasury securities.

Question 2

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Accepted Answer

A) True 
 B)False

Question 3

Tax revenues automatically increase during economic expansions and decrease during recessions.

Accepted Answer

A) True 
 B)False

Question 4

In 2018, the U.S. federal debt held by the public was

Accepted Answer

A)  held largely by foreign governments. 
B)  about four times as large as the GDP. 
C)  about twice as large as the GDP. 
D)  about 76 percent of the size of the GDP. 
A)  held largely by foreign governments. 
B)  about four times as large as the GDP. 
C)  about twice as large as the GDP. 
D)  about 76 percent of the size of the GDP.

Question 5

One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has

Accepted Answer

A)  the power to print money to ﬁnance the debt. 
B)  a strong military to protect it from creditors. 
C)  the capacity to pay off its outstanding debt with gold. 
D)  the ability to decrease interest rates and increase investment spending. 
A)  the power to print money to ﬁnance the debt. 
B)  a strong military to protect it from creditors. 
C)  the capacity to pay off its outstanding debt with gold. 
D)  the ability to decrease interest rates and increase investment spending.

Question 6

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending will

Accepted Answer

A)  cause aggregate demand and GDP to increase. 
B)  cause aggregate demand and GDP to decrease. 
C)  not affect aggregate demand and GDP. 
D)  not cause the budget deﬁcit to increase. 
A)  cause aggregate demand and GDP to increase. 
B)  cause aggregate demand and GDP to decrease. 
C)  not affect aggregate demand and GDP. 
D)  not cause the budget deﬁcit to increase.

Question 7

Which of the following best describes the idea of a political business cycle?

Accepted Answer

A)  Politicians are more willing to cut taxes and increase government spending than they are to do the reverse. 
B)  Fiscal policy will result in alternating budget deﬁcits and surpluses. 
C)  Politicians will use ﬁscal policy to cause output, real incomes, and employment to be rising prior to elections. 
D)  Despite good intentions, various timing lags will cause ﬁscal policy to reinforce the business cycle. 
A)  Politicians are more willing to cut taxes and increase government spending than they are to do the reverse. 
B)  Fiscal policy will result in alternating budget deﬁcits and surpluses. 
C)  Politicians will use ﬁscal policy to cause output, real incomes, and employment to be rising prior to elections. 
D)  Despite good intentions, various timing lags will cause ﬁscal policy to reinforce the business cycle.

Question 8

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

Accepted Answer

A)  6. 
B)  5. 
C)  4. 
D)  3. 
A)  6. 
B)  5. 
C)  4. 
D)  3.

Question 9

Accepted Answer

A)  cyclically adjusted budget surplus only. 
B)  cyclically adjusted budget deﬁcit only. 
C)  cyclically adjusted budget surplus and an actual budget surplus. 
D)  cyclically adjusted deﬁcit and an actual budget deﬁcit. 
A)  cyclically adjusted budget surplus only. 
B)  cyclically adjusted budget deﬁcit only. 
C)  cyclically adjusted budget surplus and an actual budget surplus. 
D)  cyclically adjusted deﬁcit and an actual budget deﬁcit.

Question 10

The American Recovery and Reinvestment Act of 2009 included mostly

Accepted Answer

A)  increases in taxes and in government spending. 
B)  decreases in taxes and in government spending. 
C)  increases in government spending and decreases in taxes. 
D)  decreases in government spending and increases in taxes. 
A)  increases in taxes and in government spending. 
B)  decreases in taxes and in government spending. 
C)  increases in government spending and decreases in taxes. 
D)  decreases in government spending and increases in taxes.

Question 11

The two reasons why bankruptcy is a false concern about the public debt are

Accepted Answer

A)  government spending and taxation. 
B)  reﬁnancing and taxation. 
C)  investment and reﬁnancing. 
D)  saving and investment. 
A)  government spending and taxation. 
B)  reﬁnancing and taxation. 
C)  investment and reﬁnancing. 
D)  saving and investment.

Question 12

Accepted Answer

A)  reduce government expenditures and taxes by equal-size amounts. 
B)  reduce government expenditures or increase taxes. 
C)  increase government expenditures or reduce taxes. 
D)  reduce unemployment compensation beneﬁts. 
A)  reduce government expenditures and taxes by equal-size amounts. 
B)  reduce government expenditures or increase taxes. 
C)  increase government expenditures or reduce taxes. 
D)  reduce unemployment compensation beneﬁts.

Question 13

Accepted Answer

A)  a tax reduction 
B)  a tax reduction accompanied by an even larger reduction in government spending 
C)  a tax increase accompanied by an even larger increase in government spending 
D)  an increase in government spending 
A)  a tax reduction 
B)  a tax reduction accompanied by an even larger reduction in government spending 
C)  a tax increase accompanied by an even larger increase in government spending 
D)  an increase in government spending

Question 14

$$\begin{array} { | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Government } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { GDP } \
\hline \text { Year 1 } & \$ 450 & \$ 425 & \$ 2,000 \
\hline \text { Year 2 } & 500 & 450 & 3,000 \
\hline \text { Year 3 } & 600 & 500 & 4,000 \
\hline \text { Year 4 } & 640 & 620 & 5,000 \
\hline \text { Year 5 } & 680 & 580 & 4,800 \
\hline \text { Year 6 } & 600 & 620 & 5,000 \
\hline
\end{array}$$ The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. A budget surplus occurred in year

Accepted Answer

A)  2. 
B)  3. 
C)  4. 
D)  6. 
A)  2. 
B)  3. 
C)  4. 
D)  6.

Question 15

If people expected that a ﬁscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

Accepted Answer

A)  stronger. 
B)  weaker. 
C)  the exact opposite of what was intended. 
D)  as the multiplier effect would predict. 
A)  stronger. 
B)  weaker. 
C)  the exact opposite of what was intended. 
D)  as the multiplier effect would predict.

Question 16

Which of the following historically has not been a signiﬁcant contributor to the U.S. public debt?

Accepted Answer

A)  war ﬁnancing 
B)  tax cuts and expenditure increases during the Great Recession 
C)  recessions 
D)  demand-pull inﬂation 
A)  war ﬁnancing 
B)  tax cuts and expenditure increases during the Great Recession 
C)  recessions 
D)  demand-pull inﬂation

Question 17

Refer to the diagram. Which tax system has the most 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 18

A tax reduction of a speciﬁc amount will be more expansionary the

Accepted Answer

A)  smaller is the economy's MPC. 
B)  larger is the economy's MPC. 
C)  smaller is the economy's multiplier. 
D)  less is the economy's built-in stability. 
A)  smaller is the economy's MPC. 
B)  larger is the economy's MPC. 
C)  smaller is the economy's multiplier. 
D)  less is the economy's built-in stability.

Question 19

Proponents of the notion of a "political business cycle" suggest that

Accepted Answer

A)  the standardized budget is a better indicator of the state of the economy than the actual budget, for political reasons. 
B)  cyclical swings in the economy are produced by the inherent political instability found in capitalist economies. 
C)  a possible cause of economic ﬂuctuations is the use of ﬁscal policy by policymakers for political purposes and goals. 
D)  there is constant political trading among policymakers that tends to make the economic policies of state and local governments procyclical. 
A)  the standardized budget is a better indicator of the state of the economy than the actual budget, for political reasons. 
B)  cyclical swings in the economy are produced by the inherent political instability found in capitalist economies. 
C)  a possible cause of economic ﬂuctuations is the use of ﬁscal policy by policymakers for political purposes and goals. 
D)  there is constant political trading among policymakers that tends to make the economic policies of state and local governments procyclical.

Question 20

Accepted Answer

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

Through the start of 2009, Social Security revenues exceeded payouts, and the excess inﬂow was used to buy

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Tax revenues automatically increase during economic expansions and decrease during recessions.

In 2018, the U.S. federal debt held by the public was

One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending will

Which of the following best describes the idea of a political business cycle?

The American Recovery and Reinvestment Act of 2009 included mostly

The two reasons why bankruptcy is a false concern about the public debt are

If people expected that a ﬁscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

Which of the following historically has not been a signiﬁcant contributor to the U.S. public debt?

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

A tax reduction of a speciﬁc amount will be more expansionary the

Proponents of the notion of a "political business cycle" suggest that

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

Through the start of 2009, Social Security revenues exceeded payouts, and the excess inﬂow was used to buy

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Tax revenues automatically increase during economic expansions and decrease during recessions.

In 2018, the U.S. federal debt held by the public was

One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending will

Which of the following best describes the idea of a political business cycle?

The American Recovery and Reinvestment Act of 2009 included mostly

The two reasons why bankruptcy is a false concern about the public debt are

If people expected that a ﬁscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

Which of the following historically has not been a signiﬁcant contributor to the U.S. public debt?

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

A tax reduction of a speciﬁc amount will be more expansionary the

Proponents of the notion of a "political business cycle" suggest that

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