Question 1

The large U.S.government budget deficits in the early 1980s were caused by

Accepted Answer

A)  wasteful military spending 
B)  declining transfer payments triggered by more expenditures on education and training 
C)  President Reagan's attitude toward deficits 
D)  a recession,expanded military spending,and income tax cuts 
E)  recessionary gaps in GDP 
A)  wasteful military spending 
B)  declining transfer payments triggered by more expenditures on education and training 
C)  President Reagan's attitude toward deficits 
D)  a recession,expanded military spending,and income tax cuts 
E)  recessionary gaps in GDP

Question 2

A debt that rises faster than nominal GDP will impose the following opportunity costs in the future:

Accepted Answer

A)  A permanently higher tax burden. 
B)  A period of inflation. 
C)  Reduced government outlays relative to GDP 
D)  Higher taxes relative to GDP. 
E)  All of the above. 
A)  A permanently higher tax burden. 
B)  A period of inflation. 
C)  Reduced government outlays relative to GDP 
D)  Higher taxes relative to GDP. 
E)  All of the above.

Question 3

Government outlays consist of

Accepted Answer

A)  all governmental purchases resulting from contracts with the private sector and foreign organizations 
B)  government purchases,transfer payments,and interest on the national debt 
C)  any purchase by an organization that is not trying to earn a profit 
D)  government purchases and transfer payments minus the interest on the national debt 
E)  total receipts from all organizations doing business with any level of government 
A)  all governmental purchases resulting from contracts with the private sector and foreign organizations 
B)  government purchases,transfer payments,and interest on the national debt 
C)  any purchase by an organization that is not trying to earn a profit 
D)  government purchases and transfer payments minus the interest on the national debt 
E)  total receipts from all organizations doing business with any level of government

Question 4

Which case represents the largest increase in the real national debt?

Accepted Answer

A)  The price level increases by 500 percent and nominal debt increases by 500 percent. 
B)  The price level increases by 200 percent and nominal debt increases by 600 percent. 
C)  The price level decreases by 50 percent and nominal debt increases by 300 percent. 
D)  The price level increases by 400 percent and nominal debt increases by 200 percent. 
E)  The price level decreases by 90 percent and nominal debt increases by 200 percent. 
A)  The price level increases by 500 percent and nominal debt increases by 500 percent. 
B)  The price level increases by 200 percent and nominal debt increases by 600 percent. 
C)  The price level decreases by 50 percent and nominal debt increases by 300 percent. 
D)  The price level increases by 400 percent and nominal debt increases by 200 percent. 
E)  The price level decreases by 90 percent and nominal debt increases by 200 percent.

Question 5

The federal government's budget been in deficit every year since 1959.

Accepted Answer

A) True 
 B)False

Question 6

The concerns about the 2009 $787 billion stimulus by the Obama Administration were that

Accepted Answer

A)  it was too small. 
B)  it was too large. 
C)  it was not well designed. 
D)  Some economists opposed any stimulus whatsoever. 
E)  All of the above. 
A)  it was too small. 
B)  it was too large. 
C)  it was not well designed. 
D)  Some economists opposed any stimulus whatsoever. 
E)  All of the above.

Question 7

When calculating the effect of a tax cut on equilibrium GDP,the tax multiplier is always

Accepted Answer

A)  2.0 smaller than the spending multiplier 
B)  1.0 smaller than the spending multiplier and negative in sign 
C)  positive 
D)  positive and larger than the spending multiplier 
E)  negative and larger than the spending multiplier 
A)  2.0 smaller than the spending multiplier 
B)  1.0 smaller than the spending multiplier and negative in sign 
C)  positive 
D)  positive and larger than the spending multiplier 
E)  negative and larger than the spending multiplier

Question 8

In the long run,

Accepted Answer

A)  large government budget deficits cause productivity to increase,thereby leading to inflation 
B)  large government budget deficits drive down interest rates and reduce investment spending 
C)  large government budget surpluses mean reductions in the money supply 
D)  changes in the government budget deficit have no effect on the capital stock 
E)  large government budget deficits drive up interest rates and reduce investment spending. 
A)  large government budget deficits cause productivity to increase,thereby leading to inflation 
B)  large government budget deficits drive down interest rates and reduce investment spending 
C)  large government budget surpluses mean reductions in the money supply 
D)  changes in the government budget deficit have no effect on the capital stock 
E)  large government budget deficits drive up interest rates and reduce investment spending.

Question 9

To pay interest to those U.S.residents who hold government bonds,the government must tax other U.S.residents,implying that the more we redistribute income among residents to cover interest payments,the higher the average tax rate will have to be.

Accepted Answer

A) True 
 B)False

Question 10

The $787 billion stimulus was broken down as roughly ______ tax cuts,roughly ______ greater government purchases,and roughly ______ was transfer payments to help those affected by the recession,along with state and local governments.

Accepted Answer

A)  20 percent,40 percent,40 percent. 
B)  40 percent,20 percent,40 percent. 
C)  30 percent,50 percent,20 percent 
D)  50 percent,30 percent,20 percent. 
E)  33 percent,33 percent,33 percent. 
A)  20 percent,40 percent,40 percent. 
B)  40 percent,20 percent,40 percent. 
C)  30 percent,50 percent,20 percent 
D)  50 percent,30 percent,20 percent. 
E)  33 percent,33 percent,33 percent.

Question 11

Which of the following is a government purchase?

Accepted Answer

A)  The income tax 
B)  The property tax 
C)  Social Security benefits paid to a retired government worker 
D)  Food stamps 
E)  The salary of a federal judge. 
A)  The income tax 
B)  The property tax 
C)  Social Security benefits paid to a retired government worker 
D)  Food stamps 
E)  The salary of a federal judge.

Question 12

Government outlays and government expenditures mean the same thing..

Accepted Answer

A) True 
 B)False

Question 13

If the expenditure multiplier is 6.5,the tax multiplier is

Accepted Answer

A)  7.5 
B)  5.5 
C)  -5.5 
D)  -6.5 
E)  -7.5 
A)  7.5 
B)  5.5 
C)  -5.5 
D)  -6.5 
E)  -7.5

Question 14

Suppose the MPC is 0.85.If government purchases increase by $10 billion and net taxes fall by $10 billion,equilibrium output will

Accepted Answer

A)  fall by $10 billion 
B)  increase by $10 billion 
C)  increase by $20 billion 
D)  increase by $66.7 billion 
E)  increase by $123.3 billion 
A)  fall by $10 billion 
B)  increase by $10 billion 
C)  increase by $20 billion 
D)  increase by $66.7 billion 
E)  increase by $123.3 billion

Question 15

The federal government's revenue has declined steadily relative to GDP since 1960.

Accepted Answer

A) True 
 B)False

Question 16

In the long run,

Accepted Answer

A)  the government's tax policies do not affect the rate of investment spending. 
B)  lower tax rates will have no effect on the average standard of living. 
C)  lower tax rates will lead to faster growth in the average standard of living. 
D)  higher tax rates will lead to slower growth in the average standard of living. 
E)  the debt and the deficit will converge to zero. 
A)  the government's tax policies do not affect the rate of investment spending. 
B)  lower tax rates will have no effect on the average standard of living. 
C)  lower tax rates will lead to faster growth in the average standard of living. 
D)  higher tax rates will lead to slower growth in the average standard of living. 
E)  the debt and the deficit will converge to zero.

Question 17

Suppose you are the president of a large bank.In which situation would you be most reluctant to loan money to a country?

Accepted Answer

A)  Its nominal debt is $10 trillion. 
B)  Its nominal debt is 1 percent of nominal GDP. 
C)  Its nominal deficit is $150 billion. 
D)  Its real deficit is 100 percent of real GDP. 
E)  Its real debt is 1 percent of real GDP. 
A)  Its nominal debt is $10 trillion. 
B)  Its nominal debt is 1 percent of nominal GDP. 
C)  Its nominal deficit is $150 billion. 
D)  Its real deficit is 100 percent of real GDP. 
E)  Its real debt is 1 percent of real GDP.

Question 18

Relative to GDP,interest on the national debt

Accepted Answer

A)  has grown at a steady rate during the last 40 years 
B)  has remained constant in recent decades 
C)  grew especially rapidly during the 1980s 
D)  declined slightly during the 1980s 
E)  fluctuates as retirement portfolios change their allocation of government securities 
A)  has grown at a steady rate during the last 40 years 
B)  has remained constant in recent decades 
C)  grew especially rapidly during the 1980s 
D)  declined slightly during the 1980s 
E)  fluctuates as retirement portfolios change their allocation of government securities

Question 19

Which of the following is true?

Accepted Answer

A)  As the national debt increases relative to GDP,interest on the debt relative to GDP declines. 
B)  As the national debt decreases relative to GDP,interest on the debt relative to GDP rises. 
C)  As the national debt increases relative to GDP,interest on the debt relative to GDP rises. 
D)  The national debt relative to GDP has been constant in recent years. 
E)  The national debt relative to GDP has been falling in the last few years. 
A)  As the national debt increases relative to GDP,interest on the debt relative to GDP declines. 
B)  As the national debt decreases relative to GDP,interest on the debt relative to GDP rises. 
C)  As the national debt increases relative to GDP,interest on the debt relative to GDP rises. 
D)  The national debt relative to GDP has been constant in recent years. 
E)  The national debt relative to GDP has been falling in the last few years.

Question 20

One way to describe the tax multiplier is that it equals the

Accepted Answer

A)  the spending multiplier 
B)  the negative of the spending multiplier minus1.0 
C)  the GNP gap minus the GDP gap 
D)  the reciprocal of the marginal propensity to consume 
E)  the best estimate of the optimal tax rate 
A)  the spending multiplier 
B)  the negative of the spending multiplier minus1.0 
C)  the GNP gap minus the GDP gap 
D)  the reciprocal of the marginal propensity to consume 
E)  the best estimate of the optimal tax rate

The large U.S.government budget deficits in the early 1980s were caused by

A debt that rises faster than nominal GDP will impose the following opportunity costs in the future:

Government outlays consist of

Which case represents the largest increase in the real national debt?

The federal government's budget been in deficit every year since 1959.

The concerns about the 2009 $787 billion stimulus by the Obama Administration were that

When calculating the effect of a tax cut on equilibrium GDP,the tax multiplier is always

In the long run,

To pay interest to those U.S.residents who hold government bonds,the government must tax other U.S.residents,implying that the more we redistribute income among residents to cover interest payments,the higher the average tax rate will have to be.

The $787 billion stimulus was broken down as roughly tax cuts,roughly greater government purchases,and roughly __ was transfer payments to help those affected by the recession,along with state and local governments.

Which of the following is a government purchase?

Government outlays and government expenditures mean the same thing..

If the expenditure multiplier is 6.5,the tax multiplier is

Suppose the MPC is 0.85.If government purchases increase by $10 billion and net taxes fall by $10 billion,equilibrium output will

The federal government's revenue has declined steadily relative to GDP since 1960.

In the long run,

Suppose you are the president of a large bank.In which situation would you be most reluctant to loan money to a country?

Relative to GDP,interest on the national debt

Which of the following is true?

One way to describe the tax multiplier is that it equals the

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

The large U.S.government budget deficits in the early 1980s were caused by

A debt that rises faster than nominal GDP will impose the following opportunity costs in the future:

Government outlays consist of

Which case represents the largest increase in the real national debt?

The federal government's budget been in deficit every year since 1959.

The concerns about the 2009 $787 billion stimulus by the Obama Administration were that

When calculating the effect of a tax cut on equilibrium GDP,the tax multiplier is always

In the long run,

To pay interest to those U.S.residents who hold government bonds,the government must tax other U.S.residents,implying that the more we redistribute income among residents to cover interest payments,the higher the average tax rate will have to be.

The $787 billion stimulus was broken down as roughly ______ tax cuts,roughly ______ greater government purchases,and roughly ______ was transfer payments to help those affected by the recession,along with state and local governments.

Which of the following is a government purchase?

Government outlays and government expenditures mean the same thing..

If the expenditure multiplier is 6.5,the tax multiplier is

Suppose the MPC is 0.85.If government purchases increase by $10 billion and net taxes fall by $10 billion,equilibrium output will

The federal government's revenue has declined steadily relative to GDP since 1960.

In the long run,

Suppose you are the president of a large bank.In which situation would you be most reluctant to loan money to a country?

Relative to GDP,interest on the national debt

Which of the following is true?

One way to describe the tax multiplier is that it equals the

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

The $787 billion stimulus was broken down as roughly tax cuts,roughly greater government purchases,and roughly __ was transfer payments to help those affected by the recession,along with state and local governments.