Question 1

Over the past several decades,federal transfer payments as a fraction of GDP have trended upward.

Accepted Answer

A) True 
 B)False

Question 2

Countercyclical fiscal policy can

Accepted Answer

A)  only be employed in reaction to an existing recession 
B)  only be employed in reaction to an existing boom 
C)  be employed to prevent a potential recession or boom or in reaction to an existing recession or boom 
D)  only be employed to prevent a potential boom 
E)  only be employed to prevent a potential recession. 
A)  only be employed in reaction to an existing recession 
B)  only be employed in reaction to an existing boom 
C)  be employed to prevent a potential recession or boom or in reaction to an existing recession or boom 
D)  only be employed to prevent a potential boom 
E)  only be employed to prevent a potential recession.

Question 3

Before about 1975

Accepted Answer

A)  any federal deficits were at least 5 percent of GDP. 
B)  most federal deficits were less than 2 percent of GDP. 
C)  the federal government never ran deficits. 
D)  the federal government always ran a surplus. 
E)  any federal deficits were at least 7 percent of GDP. 
A)  any federal deficits were at least 5 percent of GDP. 
B)  most federal deficits were less than 2 percent of GDP. 
C)  the federal government never ran deficits. 
D)  the federal government always ran a surplus. 
E)  any federal deficits were at least 7 percent of GDP.

Question 4

"Rolling over" the debt means

Accepted Answer

A)  to repay old bonds that come due for payment by issuing new bonds. 
B)  to repay old bonds that come due by printing money. 
C)  dividing the tax burden of the debt across the fifty states based on their share of the population. 
D)  dividing the tax burden of the debt across the fifty states based on their share of economic activity. 
E)  to repay old bonds that come due by giving gold to the bondholders from the national gold depository in Fort Knox.. 
A)  to repay old bonds that come due for payment by issuing new bonds. 
B)  to repay old bonds that come due by printing money. 
C)  dividing the tax burden of the debt across the fifty states based on their share of the population. 
D)  dividing the tax burden of the debt across the fifty states based on their share of economic activity. 
E)  to repay old bonds that come due by giving gold to the bondholders from the national gold depository in Fort Knox..

Question 5

A key tool of countercyclical fiscal policy is

Accepted Answer

A)  the interest rate 
B)  the federal funds rate 
C)  the tax code 
D)  the regulatory code 
E)  Presidential executive orders. 
A)  the interest rate 
B)  the federal funds rate 
C)  the tax code 
D)  the regulatory code 
E)  Presidential executive orders.

Question 6

We expect a rise in transfer payments when

Accepted Answer

A)  the needs of the poor receive more publicity 
B)  taxes rise 
C)  GDP rises and inflation soars 
D)  the retirement age remains unchanged over time 
E)  recessions occur 
A)  the needs of the poor receive more publicity 
B)  taxes rise 
C)  GDP rises and inflation soars 
D)  the retirement age remains unchanged over time 
E)  recessions occur

Question 7

The national debt

Accepted Answer

A)  is currently greater than the annual federal deficit 
B)  is reduced by the revenue generated from the federal deficit 
C)  decreases as the deficit is reduced 
D)  is a flow variable 
E)  varies depending on developments in the stock market 
A)  is currently greater than the annual federal deficit 
B)  is reduced by the revenue generated from the federal deficit 
C)  decreases as the deficit is reduced 
D)  is a flow variable 
E)  varies depending on developments in the stock market

Question 8

In an expansion,tax payments tend to increase and transfer payments tend to decrease.

Accepted Answer

A) True 
 B)False

Question 9

In the long run,

Accepted Answer

A)  an increase in the federal budget deficit can lower the interest rate and investment spending. 
B)  an increase in the federal budget deficit can raise the interest rate and investment spending. 
C)  a decrease in the federal budget deficit can lower the interest rate and raise investment spending. 
D)  a decrease in the federal budget deficit can raise the interest rate and lower investment spending. 
E)  a decrease in the federal budget deficit can lower the interest rate and lower investment spending. 
A)  an increase in the federal budget deficit can lower the interest rate and investment spending. 
B)  an increase in the federal budget deficit can raise the interest rate and investment spending. 
C)  a decrease in the federal budget deficit can lower the interest rate and raise investment spending. 
D)  a decrease in the federal budget deficit can raise the interest rate and lower investment spending. 
E)  a decrease in the federal budget deficit can lower the interest rate and lower investment spending.

Question 10

The formula for calculating the tax multiplier is

Accepted Answer

A)  MPC/(1 - MP
C)  
B)  MPC/(1 + MP
C)  
C)  -MPC/(MPC - 1) 
D)  -MPC/(1 - MP
C)  
E)  MPC + (1 - MP
C)  
A)  MPC/(1 - MP
C)  
B)  MPC/(1 + MP
C)  
C)  -MPC/(MPC - 1) 
D)  -MPC/(1 - MP
C)  
E)  MPC + (1 - MP
C)

Question 11

In the long run,

Accepted Answer

A)  continuing budget surpluses cause interest rates to fall,thereby stimulating investment spending 
B)  any deviation from a balanced budget will plunge the economy into recession 
C)  there can be no economic growth unless the government's budget is in surplus 
D)  there can be no economic growth unless the government's budget is balanced 
E)  government spending must increase as a fraction of GDP 
A)  continuing budget surpluses cause interest rates to fall,thereby stimulating investment spending 
B)  any deviation from a balanced budget will plunge the economy into recession 
C)  there can be no economic growth unless the government's budget is in surplus 
D)  there can be no economic growth unless the government's budget is balanced 
E)  government spending must increase as a fraction of GDP

Question 12

When the U.S.government runs a deficit,it usually does the following:

Accepted Answer

A)  It buys government bonds from the public 
B)  It asks the Treasury Department to print money to pay for the deficit 
C)  It sells new government bonds to the public 
D)  It borrows money directly from the Federal Reserve 
E)  It asks the Federal Reserve to print money to pay for the deficit. 
A)  It buys government bonds from the public 
B)  It asks the Treasury Department to print money to pay for the deficit 
C)  It sells new government bonds to the public 
D)  It borrows money directly from the Federal Reserve 
E)  It asks the Federal Reserve to print money to pay for the deficit.

Question 13

The single source of concern about the national debt is

Accepted Answer

A)  gimmicks like the National Debt Clock. 
B)  the interest payments that must be made on the debt every year. 
C)  the transfer payments that must be made every year. 
D)  the large trade deficits that we face with other countries. 
E)  none of the above. 
A)  gimmicks like the National Debt Clock. 
B)  the interest payments that must be made on the debt every year. 
C)  the transfer payments that must be made every year. 
D)  the large trade deficits that we face with other countries. 
E)  none of the above.

Question 14

Which of the following is true? The federal government's budget

Accepted Answer

A)  was always in surplus until the 1980s 
B)  is in deficit now but has been in surplus in most of the past 40 years 
C)  has been virtually perfectly balanced for the past 5 years 
D)  deficit has averaged around zero for the last several decades 
E)  switched from deficits to surpluses in the late 1990s 
A)  was always in surplus until the 1980s 
B)  is in deficit now but has been in surplus in most of the past 40 years 
C)  has been virtually perfectly balanced for the past 5 years 
D)  deficit has averaged around zero for the last several decades 
E)  switched from deficits to surpluses in the late 1990s

Question 15

An economic expansion causes

Accepted Answer

A)  the federal budget deficit to rise. 
B)  federal government tax receipts to fall. 
C)  federal government spending to rise. 
D)  transfer payments to fall. 
E)  transfer payments to rise. 
A)  the federal budget deficit to rise. 
B)  federal government tax receipts to fall. 
C)  federal government spending to rise. 
D)  transfer payments to fall. 
E)  transfer payments to rise.

Question 16

When negative spending shocks occur,transfer payments automatically fall.

Accepted Answer

A) True 
 B)False

Question 17

As long as debt grows by the same percentage as nominal GDP,the debt-to-GDP ratio will stay constant but the interest payments-to-GDP ratio will increase.

Accepted Answer

A) True 
 B)False

Question 18

Assume that there is a proposed tax cut by the U.S.House of Representatives.A problem is

Accepted Answer

A)  how to distribute the benefits of the total tax cut among different groups within the country. 
B)  that the process occurs very quickly without much time to study any negative effects. 
C)  that tax cuts are harder to implement than tax increases. 
D)  that the Federal Reserve has almost invariably been in favor of moderate tax increases rather than tax cuts. 
E)  this statement is wrong,as tax bills originate in the U.S.Senate. 
A)  how to distribute the benefits of the total tax cut among different groups within the country. 
B)  that the process occurs very quickly without much time to study any negative effects. 
C)  that tax cuts are harder to implement than tax increases. 
D)  that the Federal Reserve has almost invariably been in favor of moderate tax increases rather than tax cuts. 
E)  this statement is wrong,as tax bills originate in the U.S.Senate.

Question 19

The total debt includes amounts one government agency owes to another.

Accepted Answer

A) True 
 B)False

Question 20

There are two kinds of changes in net taxes: First,net taxes can change if the government changes its tax or transfer policies.Second,net taxes change automatically as income rises and falls,without any change in policy.The _________ kind of change sets off the multiplier process,while the _________ kind of change occurs during the multiplier process.

Accepted Answer

A)  first;first. 
B)  first;second. 
C)  second;first. 
D)  second;second. 
E)  None of the above. 
A)  first;first. 
B)  first;second. 
C)  second;first. 
D)  second;second. 
E)  None of the above.

Over the past several decades,federal transfer payments as a fraction of GDP have trended upward.

Countercyclical fiscal policy can

Before about 1975

"Rolling over" the debt means

A key tool of countercyclical fiscal policy is

We expect a rise in transfer payments when

The national debt

In an expansion,tax payments tend to increase and transfer payments tend to decrease.

In the long run,

The formula for calculating the tax multiplier is

In the long run,

When the U.S.government runs a deficit,it usually does the following:

The single source of concern about the national debt is

Which of the following is true? The federal government's budget

An economic expansion causes

When negative spending shocks occur,transfer payments automatically fall.

As long as debt grows by the same percentage as nominal GDP,the debt-to-GDP ratio will stay constant but the interest payments-to-GDP ratio will increase.

Assume that there is a proposed tax cut by the U.S.House of Representatives.A problem is

The total debt includes amounts one government agency owes to another.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 12: Fiscal Policy

Over the past several decades,federal transfer payments as a fraction of GDP have trended upward.

Countercyclical fiscal policy can

Before about 1975

"Rolling over" the debt means

A key tool of countercyclical fiscal policy is

We expect a rise in transfer payments when

The national debt

In an expansion,tax payments tend to increase and transfer payments tend to decrease.

In the long run,

The formula for calculating the tax multiplier is

In the long run,

When the U.S.government runs a deficit,it usually does the following:

The single source of concern about the national debt is

Which of the following is true? The federal government's budget

An economic expansion causes

When negative spending shocks occur,transfer payments automatically fall.

As long as debt grows by the same percentage as nominal GDP,the debt-to-GDP ratio will stay constant but the interest payments-to-GDP ratio will increase.

Assume that there is a proposed tax cut by the U.S.House of Representatives.A problem is

The total debt includes amounts one government agency owes to another.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters