Question 1

Ricardian equivalence implies a tax multiplier of zero.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following cases represent the smallest increase in the real national debt?

Accepted Answer

A)  The price level increases by 200 percent and the nominal debt increases by 200 percent. 
B)  The price level increases by 200 percent and the nominal debt increases by 100 percent. 
C)  The price level increases by 200 percent and the nominal debt increases by 500 percent. 
D)  The price level increases by 100 percent and the nominal debt increases by 300 percent. 
E)  None of the above. 
A)  The price level increases by 200 percent and the nominal debt increases by 200 percent. 
B)  The price level increases by 200 percent and the nominal debt increases by 100 percent. 
C)  The price level increases by 200 percent and the nominal debt increases by 500 percent. 
D)  The price level increases by 100 percent and the nominal debt increases by 300 percent. 
E)  None of the above.

Question 3

As a percentage of GDP,non-military government purchases have remained very low and stable.

Accepted Answer

A) True 
 B)False

Question 4

A key tool of countercyclical fiscal policy is

Accepted Answer

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

Question 5

Countercyclical fiscal policy has a serious problem with

Accepted Answer

A)  the timing of its enactment and impact. 
B)  the easy reversibility of policy. 
C)  the tendency of the Federal Reserve to immediately counter Congressional action. 
D)  the courts as it has been held to be unconstitutional. 
E)  Presidential executive orders. 
A)  the timing of its enactment and impact. 
B)  the easy reversibility of policy. 
C)  the tendency of the Federal Reserve to immediately counter Congressional action. 
D)  the courts as it has been held to be unconstitutional. 
E)  Presidential executive orders.

Question 6

Government debt and interest payments on that debt

Accepted Answer

A)  are problems if they grow faster than GDP 
B)  are unrelated in the short run 
C)  are unrelated in the long run,but not in the short run 
D)  generally grow faster than government spending 
E)  contributed to the crisis experienced by the U.S.economy in the late 1990s 
A)  are problems if they grow faster than GDP 
B)  are unrelated in the short run 
C)  are unrelated in the long run,but not in the short run 
D)  generally grow faster than government spending 
E)  contributed to the crisis experienced by the U.S.economy in the late 1990s

Question 7

Recessions are associated with budget deficits.

Accepted Answer

A) True 
 B)False

Question 8

Under which of the following circumstances should we be concerned about a rising national debt?

Accepted Answer

A)  When it rises at a slower pace than GDP. 
B)  When the government runs deficits over a long period of time,such as a decade. 
C)  When it rises at a faster pace than GDP. 
D)  When the government does not run enough surpluses to counteract prior deficits. 
E)  When it rises at a slower pace than the money supply. 
A)  When it rises at a slower pace than GDP. 
B)  When the government runs deficits over a long period of time,such as a decade. 
C)  When it rises at a faster pace than GDP. 
D)  When the government does not run enough surpluses to counteract prior deficits. 
E)  When it rises at a slower pace than the money supply.

Question 9

Government expenditures are larger than government outlays.

Accepted Answer

A) True 
 B)False

Question 10

If the national debt is growing no faster than GDP,

Accepted Answer

A)  the government will have to raise taxes 
B)  the nation's standard of living will fall 
C)  government investment spending will be negative 
D)  the government can pay interest on the debt without having to raise taxes 
E)  the government will be unable to pay interest on the debt 
A)  the government will have to raise taxes 
B)  the nation's standard of living will fall 
C)  government investment spending will be negative 
D)  the government can pay interest on the debt without having to raise taxes 
E)  the government will be unable to pay interest on the debt

Question 11

If the marginal propensity to consume is 0.75 and autonomous consumption spending will decrease by $30 billion,by how much would net taxes need to decrease in order to have no change in output? (Ignore any timing issues. )

Accepted Answer

A)  $60 billion 
B)  $30 billion 
C)  $90 billion 
D)  $120 billion 
E)  $40 billion 
A)  $60 billion 
B)  $30 billion 
C)  $90 billion 
D)  $120 billion 
E)  $40 billion

Question 12

Countercyclical fiscal policy refers to

Accepted Answer

A)  any fiscal policy that cycles between budget surpluses and budget deficits 
B)  the use of taxes and government spending to keep the economy close to potential GDP in the short run 
C)  any fiscal policy that is employed during a business cycle 
D)  the use of open market purchases of bonds to keep the economy close to potential GDP in the short run 
E)  the use of changes in tax rates to keep the economy at potential output in the long run. 
A)  any fiscal policy that cycles between budget surpluses and budget deficits 
B)  the use of taxes and government spending to keep the economy close to potential GDP in the short run 
C)  any fiscal policy that is employed during a business cycle 
D)  the use of open market purchases of bonds to keep the economy close to potential GDP in the short run 
E)  the use of changes in tax rates to keep the economy at potential output in the long run.

Question 13

When positive spending shocks occur,transfer payments automatically fall.

Accepted Answer

A) True 
 B)False

Question 14

If net taxes are cut,consumer

Accepted Answer

A)  spending is not affected 
B)  spending increases by the amount of the tax cut 
C)  spending increases by an amount less than the full amount of the tax cut 
D)  saving increases by the full amount of the tax cut 
E)  spending increases by two-thirds of the amount of the tax cut and consumer saving increases by one-third of the amount of the tax cut 
A)  spending is not affected 
B)  spending increases by the amount of the tax cut 
C)  spending increases by an amount less than the full amount of the tax cut 
D)  saving increases by the full amount of the tax cut 
E)  spending increases by two-thirds of the amount of the tax cut and consumer saving increases by one-third of the amount of the tax cut

Question 15

In the long run,large and continuing budget surpluses

Accepted Answer

A)  mean higher taxes and a lower standard of living 
B)  mean a larger money supply and higher interest rates 
C)  are a problem because they crowd out private spending 
D)  permit the government to lower taxes,thereby encouraging work,investment,and saving 
E)  mean a larger money supply and lower interest rates 
A)  mean higher taxes and a lower standard of living 
B)  mean a larger money supply and higher interest rates 
C)  are a problem because they crowd out private spending 
D)  permit the government to lower taxes,thereby encouraging work,investment,and saving 
E)  mean a larger money supply and lower interest rates

Question 16

If the MPC is 0.8 and net taxes increase by $100 billion,what is the effect on equilibrium output?

Accepted Answer

A)  There is no effect;equilibrium output is not affected by a change in net taxes. 
B)  Equilibrium output will fall by $80 billion. 
C)  Equilibrium output will fall by $125 billion. 
D)  Equilibrium output will fall by $400 billion. 
E)  Equilibrium output will fall by $500 billion. 
A)  There is no effect;equilibrium output is not affected by a change in net taxes. 
B)  Equilibrium output will fall by $80 billion. 
C)  Equilibrium output will fall by $125 billion. 
D)  Equilibrium output will fall by $400 billion. 
E)  Equilibrium output will fall by $500 billion.

Question 17

Federal revenue as a percentage of GDP dropped significantly in the early 2000s because

Accepted Answer

A)  of increased transfer payments due to the recession. 
B)  of decreased transfer payments due to the recession. 
C)  of tax-rate decreases passed by the Bush administration and Congress as well as recessionary impacts. 
D)  of tax-rate increases passed by the Bush administration and Congress as well a recessionary effects. 
E)  of tax-rate increases passed by the Bush administration . 
A)  of increased transfer payments due to the recession. 
B)  of decreased transfer payments due to the recession. 
C)  of tax-rate decreases passed by the Bush administration and Congress as well as recessionary impacts. 
D)  of tax-rate increases passed by the Bush administration and Congress as well a recessionary effects. 
E)  of tax-rate increases passed by the Bush administration .

Question 18

Which of the following is a transfer payment?

Accepted Answer

A)  The federal government's budget deficit 
B)  Unemployment compensation payments 
C)  Military spending 
D)  Wages of government employees 
E)  The excise tax on gasoline. 
A)  The federal government's budget deficit 
B)  Unemployment compensation payments 
C)  Military spending 
D)  Wages of government employees 
E)  The excise tax on gasoline.

Question 19

In a recession,tax payments tend to increase and transfer payments tend to decrease.

Accepted Answer

A) True 
 B)False

Question 20

Gimmicks like the National Debt Clock

Accepted Answer

A)  are misleading because they show the debt in nominal dollars rather than real dollars. 
B)  are misleading because they show the debt in dollars rather than as a percentage of GDP. 
C)  are misleading because they dot not show industrial production figures. 
D)  are needed to inform the American public about the massive amounts of debt the government is accumulating. 
E)  are misleading because they show the debt as a percentage of GDP rather than in dollars. 
A)  are misleading because they show the debt in nominal dollars rather than real dollars. 
B)  are misleading because they show the debt in dollars rather than as a percentage of GDP. 
C)  are misleading because they dot not show industrial production figures. 
D)  are needed to inform the American public about the massive amounts of debt the government is accumulating. 
E)  are misleading because they show the debt as a percentage of GDP rather than in dollars.

Ricardian equivalence implies a tax multiplier of zero.

Which of the following cases represent the smallest increase in the real national debt?

As a percentage of GDP,non-military government purchases have remained very low and stable.

A key tool of countercyclical fiscal policy is

Countercyclical fiscal policy has a serious problem with

Government debt and interest payments on that debt

Recessions are associated with budget deficits.

Under which of the following circumstances should we be concerned about a rising national debt?

Government expenditures are larger than government outlays.

If the national debt is growing no faster than GDP,

If the marginal propensity to consume is 0.75 and autonomous consumption spending will decrease by $30 billion,by how much would net taxes need to decrease in order to have no change in output? (Ignore any timing issues. )

Countercyclical fiscal policy refers to

When positive spending shocks occur,transfer payments automatically fall.

If net taxes are cut,consumer

In the long run,large and continuing budget surpluses

If the MPC is 0.8 and net taxes increase by $100 billion,what is the effect on equilibrium output?

Federal revenue as a percentage of GDP dropped significantly in the early 2000s because

Which of the following is a transfer payment?

In a recession,tax payments tend to increase and transfer payments tend to decrease.

Gimmicks like the National Debt Clock

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

Ricardian equivalence implies a tax multiplier of zero.

Which of the following cases represent the smallest increase in the real national debt?

As a percentage of GDP,non-military government purchases have remained very low and stable.

A key tool of countercyclical fiscal policy is

Countercyclical fiscal policy has a serious problem with

Government debt and interest payments on that debt

Recessions are associated with budget deficits.

Under which of the following circumstances should we be concerned about a rising national debt?

Government expenditures are larger than government outlays.

If the national debt is growing no faster than GDP,

If the marginal propensity to consume is 0.75 and autonomous consumption spending will decrease by $30 billion,by how much would net taxes need to decrease in order to have no change in output? (Ignore any timing issues. )

Countercyclical fiscal policy refers to

When positive spending shocks occur,transfer payments automatically fall.

If net taxes are cut,consumer

In the long run,large and continuing budget surpluses

If the MPC is 0.8 and net taxes increase by $100 billion,what is the effect on equilibrium output?

Federal revenue as a percentage of GDP dropped significantly in the early 2000s because

Which of the following is a transfer payment?

In a recession,tax payments tend to increase and transfer payments tend to decrease.

Gimmicks like the National Debt Clock

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