Question 1

Which of the following represents the most contractionary ﬁscal policy?

Accepted Answer

A)  a $30 billion tax cut 
B)  a $30 billion increase in government spending 
C)  a $30 billion tax increase 
D)  a $30 billion decrease in government spending 
A)  a $30 billion tax cut 
B)  a $30 billion increase in government spending 
C)  a $30 billion tax increase 
D)  a $30 billion decrease in government spending

Question 2

In 2017, the public debt in the U.S. on a per capita basis was about

Accepted Answer

A)  $100,000. 
B)  $38,000. 
C)  $95,000. 
D)  $62,000. 
A)  $100,000. 
B)  $38,000. 
C)  $95,000. 
D)  $62,000.

Question 3

The Social Security program is a retirement system where payments to retirees come from their
previous contributions.

Accepted Answer

A) True 
 B)False

Question 4

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

Accepted Answer

A)  the tax cuts of 2001. 
B)  spending increases relating to the wars in Afghanistan and Iraq. 
C)  the recession of 2001. 
D)  the acceleration of inﬂation in 2001 and 2002. 
A)  the tax cuts of 2001. 
B)  spending increases relating to the wars in Afghanistan and Iraq. 
C)  the recession of 2001. 
D)  the acceleration of inﬂation in 2001 and 2002.

Question 5

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Accepted Answer

A)  ﬁscal policy turned more expansionary. 
B)  ﬁscal policy turned more contractionary. 
C)  GDP increased. 
D)  GDP decreased. 
A)  ﬁscal policy turned more expansionary. 
B)  ﬁscal policy turned more contractionary. 
C)  GDP increased. 
D)  GDP decreased.

Question 6

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP and actual GDP are each $400 billion, this economy will
Realize a

Accepted Answer

A)  cyclically adjusted deﬁcit of $20 billion. 
B)  cyclical deﬁcit of $20 billion. 
C)  cyclical surplus of $20 billion. 
D)  cyclically adjusted deﬁcit of zero. 
A)  cyclically adjusted deﬁcit of $20 billion. 
B)  cyclical deﬁcit of $20 billion. 
C)  cyclical surplus of $20 billion. 
D)  cyclically adjusted deﬁcit of zero.

Question 7

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Accepted Answer

A)  cyclical 
B)  implicit 
C)  discretionary 
D)  nondiscretionary 
A)  cyclical 
B)  implicit 
C)  discretionary 
D)  nondiscretionary

Question 8

Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

Accepted Answer

A)  increased by more than $100 billion. 
B)  increased by less than $100 billion. 
C)  increased by $100 billion. 
D)  not increased. 
A)  increased by more than $100 billion. 
B)  increased by less than $100 billion. 
C)  increased by $100 billion. 
D)  not increased.

Question 9

The group of three economists who provide ﬁscal policy recommendations to the president is the

Accepted Answer

A)  Council of Economic Advisers. 
B)  Joint Economic Committee. 
C)  Bureau of Economic Analysis. 
D)  Federal Reserve Board of Governors. 
A)  Council of Economic Advisers. 
B)  Joint Economic Committee. 
C)  Bureau of Economic Analysis. 
D)  Federal Reserve Board of Governors.

Question 10

The crowding-out effect arises when

Accepted Answer

A)  government lends in the money market, thus decreasing interest rates. 
B)  government borrows in the money market, thus decreasing interest rates. 
C)  government lends in the money market, thus increasing interest rates. 
D)  government borrows in the money market, thus causing an increase in interest rates. 
A)  government lends in the money market, thus decreasing interest rates. 
B)  government borrows in the money market, thus decreasing interest rates. 
C)  government lends in the money market, thus increasing interest rates. 
D)  government borrows in the money market, thus causing an increase in interest rates.

Question 11

The public debt is the amount of money that

Accepted Answer

A)  state and local governments owe to the federal government. 
B)  Americans owe to foreigners. 
C)  the federal government owes to holders of U.S. securities. 
D)  the federal government owes to taxpayers. 
A)  state and local governments owe to the federal government. 
B)  Americans owe to foreigners. 
C)  the federal government owes to holders of U.S. securities. 
D)  the federal government owes to taxpayers.

Question 12

The set of ﬁscal policies that would be most contractionary would be a(n)

Accepted Answer

A)  increase in government spending and taxes. 
B)  decrease in government spending and taxes. 
C)  increase in government spending and a decrease in taxes. 
D)  decrease in government spending and an increase in taxes. 
A)  increase in government spending and taxes. 
B)  decrease in government spending and taxes. 
C)  increase in government spending and a decrease in taxes. 
D)  decrease in government spending and an increase in taxes.

Question 13

If government increases the size of its cyclically adjusted surplus, we can

Accepted Answer

A)  assume that government is causing interest rates to rise. 
B)  not determine government's impact on the economy without also knowing the status of the actual budget. 
C)  assume that government is having a contractionary effect on the economy. 
D)  assume that government is having an expansionary effect on the economy. 
A)  assume that government is causing interest rates to rise. 
B)  not determine government's impact on the economy without also knowing the status of the actual budget. 
C)  assume that government is having a contractionary effect on the economy. 
D)  assume that government is having an expansionary effect on the economy.

Question 14

One timing problem in using ﬁscal policy to counter a recession is the "administrative 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 15

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an important problem associated with the public debt?

Accepted Answer

A)  Payments of interest on the debt lead to greater income inequality. 
B)  Interest payments on the debt tend to reduce economic incentives to work and invest. 
C)  Government borrowing to ﬁnance the debt may lead to too much private investment. 
D)  Payment of interest on the debt held by foreigners sends real resources abroad. 
A)  Payments of interest on the debt lead to greater income inequality. 
B)  Interest payments on the debt tend to reduce economic incentives to work and invest. 
C)  Government borrowing to ﬁnance the debt may lead to too much private investment. 
D)  Payment of interest on the debt held by foreigners sends real resources abroad.

Question 17

$$\begin{array} { | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Government } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { GDP } \
\hline \text { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \
\hline \text { Year 2 } & 850 & 850 & 4,200 \
\hline \text { Year 3 } & 900 & 875 & 4,350 \
\hline \text { Year 4 } & 950 & 900 & 4,500 \
\hline \text { Year 5 } & 1,000 & 925 & 4,600 \
\hline
\end{array}$$ The table contains budget information for a hypothetical economy. All data are in billions of dollars. The budget de?cit was $75 billion in

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 18

Since 2002, the United States has had

Accepted Answer

A)  large federal budget surpluses. 
B)  large federal budget deﬁcits. 
C)  modest trade surpluses. 
D)  a rising natural rate of unemployment. 
A)  large federal budget surpluses. 
B)  large federal budget deﬁcits. 
C)  modest trade surpluses. 
D)  a rising natural rate of unemployment.

Question 19

The last year when there was a surplus in the actual U.S. Federal budget was in

Accepted Answer

A)  2001. 
B)  2002. 
C)  2003. 
D)  2004. 
A)  2001. 
B)  2002. 
C)  2003. 
D)  2004.

Question 20

Accepted Answer

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

Which of the following represents the most contractionary ﬁscal policy?

In 2017, the public debt in the U.S. on a per capita basis was about

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP and actual GDP are each $400 billion, this economy will Realize a

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

The group of three economists who provide ﬁscal policy recommendations to the president is the

The crowding-out effect arises when

The public debt is the amount of money that

The set of ﬁscal policies that would be most contractionary would be a(n)

If government increases the size of its cyclically adjusted surplus, we can

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

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Which of the following is not an important problem associated with the public debt?

Government Spending Tax Revenues GDP Year 1 \ 800 \ 825 \ 4,000 Year 2 850 850 4,200 Year 3 900 875 4,350 Year 4 950 900 4,500 Year 5 1,000 925 4,600 The table contains budget information for a hypothetical economy. All data are in billions of dollars. The budget de?cit was $75 billion in

Since 2002, the United States has had

The last year when there was a surplus in the actual U.S. Federal budget was in

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

Which of the following represents the most contractionary ﬁscal policy?

In 2017, the public debt in the U.S. on a per capita basis was about

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP and actual GDP are each $400 billion, this economy will Realize a

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

The group of three economists who provide ﬁscal policy recommendations to the president is the

The crowding-out effect arises when

The public debt is the amount of money that

The set of ﬁscal policies that would be most contractionary would be a(n)

If government increases the size of its cyclically adjusted surplus, we can

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

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Which of the following is not an important problem associated with the public debt?

Government Spending Tax Revenues GDP Year 1 \ 800 \ 825 \ 4,000 Year 2 850 850 4,200 Year 3 900 875 4,350 Year 4 950 900 4,500 Year 5 1,000 925 4,600 The table contains budget information for a hypothetical economy. All data are in billions of dollars. The budget de?cit was $75 billion in

Since 2002, the United States has had

The last year when there was a surplus in the actual U.S. Federal budget was in

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