Question 1

The crowding-out effect of higher interest rates can be avoided by

Accepted Answer

A)  expansionary monetary policy. 
B)  expansionary fiscal policy. 
C)  contractionary monetary policy. 
D)  decreasing taxes. 
A)  expansionary monetary policy. 
B)  expansionary fiscal policy. 
C)  contractionary monetary policy. 
D)  decreasing taxes.

Question 2

Monetizing deficits has lead to serious inflation in

Accepted Answer

A)  the United States. 
B)  Canada. 
C)  the United Kingdom. 
D)  Russia, Latin America, and Israel. 
E)  All of the above are correct. 
A)  the United States. 
B)  Canada. 
C)  the United Kingdom. 
D)  Russia, Latin America, and Israel. 
E)  All of the above are correct.

Question 3

The primary conclusion of using inflation accounting is that inflation

Accepted Answer

A)  distorts the tax system, and results in slower economic growth. 
B)  reduces the national debt to its nominal value instead of its real value. 
C)  causes recessions, and increases the structural deficit. 
D)  distorts government budget accounting by exaggerating interest expense. 
A)  distorts the tax system, and results in slower economic growth. 
B)  reduces the national debt to its nominal value instead of its real value. 
C)  causes recessions, and increases the structural deficit. 
D)  distorts government budget accounting by exaggerating interest expense.

Question 4

A recessionary gap causes national debt to increase because

Accepted Answer

A)  the growth in GDP slows. 
B)  interest on previously incurred debt must be paid. 
C)  recessionary periods require huge buildups of defense materials. 
D)  income tax receipts drop off markedly. 
A)  the growth in GDP slows. 
B)  interest on previously incurred debt must be paid. 
C)  recessionary periods require huge buildups of defense materials. 
D)  income tax receipts drop off markedly.

Question 5

Crowding in can be defined as

Accepted Answer

A)  an increase in the budget deficit increases demand so that investment increases. 
B)  tax incentives on investment encourage capital formation, an increase in aggregate supply. 
C)  consumption rises in a recovery, which increases demand for investment. 
D)  the budget deficit falls enough to lower interest rates to stimulate investment. 
A)  an increase in the budget deficit increases demand so that investment increases. 
B)  tax incentives on investment encourage capital formation, an increase in aggregate supply. 
C)  consumption rises in a recovery, which increases demand for investment. 
D)  the budget deficit falls enough to lower interest rates to stimulate investment.

Question 6

If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy,we know that

Accepted Answer

A)  incomes will fall. 
B)  the interest rate will rise. 
C)  incomes will rise. 
D)  the interest rate will fall. 
A)  incomes will fall. 
B)  the interest rate will rise. 
C)  incomes will rise. 
D)  the interest rate will fall.

Question 7

The U.S.government need never default on its debt because

Accepted Answer

A)  it can easily nationalize banks, who own all the debt, and then owe it to itself. 
B)  it can raise the funds it needs to repay by taxation, and it can print money to repay. 
C)  it owes the debt to itself, and it can always ignore a demand for repayment. 
D)  it can simply reduce spending enough to generate funds to repay its debt. 
A)  it can easily nationalize banks, who own all the debt, and then owe it to itself. 
B)  it can raise the funds it needs to repay by taxation, and it can print money to repay. 
C)  it owes the debt to itself, and it can always ignore a demand for repayment. 
D)  it can simply reduce spending enough to generate funds to repay its debt.

Question 8

The structural deficit is extremely sensitive to the performance of the economy.

Accepted Answer

A) True 
 B)False

Question 9

Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?

Accepted Answer

A)  Because it adjusts over the business cycle, and reflects the fiscal stimulus of policy. 
B)  Because it changes when policy changes, rather than when the economy changes. 
C)  Because it changes when monetary policy changes, reflecting the interest rate cost of debt. 
D)  Because it adjusts automatically, rather than requiring specific legislation. 
A)  Because it adjusts over the business cycle, and reflects the fiscal stimulus of policy. 
B)  Because it changes when policy changes, rather than when the economy changes. 
C)  Because it changes when monetary policy changes, reflecting the interest rate cost of debt. 
D)  Because it adjusts automatically, rather than requiring specific legislation.

Question 10

If crowding out occurs,the Main Burden of the debt is

Accepted Answer

A)  smaller government assets passed along to the next generation. 
B)  smaller capital stock passed along to the next generation. 
C)  fewer government services during this generation. 
D)  higher debt payments passed along to the next generation. 
A)  smaller government assets passed along to the next generation. 
B)  smaller capital stock passed along to the next generation. 
C)  fewer government services during this generation. 
D)  higher debt payments passed along to the next generation.

The crowding-out effect of higher interest rates can be avoided by

Monetizing deficits has lead to serious inflation in

The primary conclusion of using inflation accounting is that inflation

A recessionary gap causes national debt to increase because

Crowding in can be defined as

If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy,we know that

The U.S.government need never default on its debt because

The structural deficit is extremely sensitive to the performance of the economy.

Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?

If crowding out occurs,the Main Burden of the debt is

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 16: Budget Deficits in the Short and Long Run

The crowding-out effect of higher interest rates can be avoided by

Monetizing deficits has lead to serious inflation in

The primary conclusion of using inflation accounting is that inflation

A recessionary gap causes national debt to increase because

Crowding in can be defined as

If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy,we know that

The U.S.government need never default on its debt because

The structural deficit is extremely sensitive to the performance of the economy.

Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?

If crowding out occurs,the Main Burden of the debt is

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters