Question 1

The 10-year tax cut signed by President George W. Bush in 2001 aimed to _____

Accepted Answer

A)  stimulate the aggregate demand in the economy. 
B)  remove the supply bottlenecks in the economy. 
C)  close an expansionary gap through a contractionary fiscal policy. 
D)  ensure free trade flows across the world. 
E)  provide higher unemployment benefits to the residents of the economy. 
A)  stimulate the aggregate demand in the economy. 
B)  remove the supply bottlenecks in the economy. 
C)  close an expansionary gap through a contractionary fiscal policy. 
D)  ensure free trade flows across the world. 
E)  provide higher unemployment benefits to the residents of the economy.

Question 2

An increase in government purchases must always be accompanied by an increase in autonomous net taxes to boost aggregate demand.

Accepted Answer

A) True 
 B)False

Question 3

The steeper the short-run aggregate supply curve, _____

Accepted Answer

A)  the steeper the aggregate demand curve. 
B)  the larger the value of the spending multiplier. 
C)  the larger the budget surplus. 
D)  the larger the impact of a shift in aggregate demand on the equilibrium price level. 
E)  the larger the impact of a shift in aggregate demand on the equilibrium output level. 
A)  the steeper the aggregate demand curve. 
B)  the larger the value of the spending multiplier. 
C)  the larger the budget surplus. 
D)  the larger the impact of a shift in aggregate demand on the equilibrium price level. 
E)  the larger the impact of a shift in aggregate demand on the equilibrium output level.

Question 4

Which of the following best describes stagflation?

Accepted Answer

A)  rising unemployment together with economic growth 
B)  deflation coupled with a decline in money supply 
C)  deficits coupled with rising unemployment 
D)  rising unemployment and high inflation rates 
E)  inflation coupled with balance of trade deficits 
A)  rising unemployment together with economic growth 
B)  deflation coupled with a decline in money supply 
C)  deficits coupled with rising unemployment 
D)  rising unemployment and high inflation rates 
E)  inflation coupled with balance of trade deficits

Question 5

Which of the following did classical economists believe caused depressions and high unemployment?

Accepted Answer

A)  sticky product prices 
B)  tax increases 
C)  business expectations 
D)  sticky wages 
E)  sticky interest rates 
A)  sticky product prices 
B)  tax increases 
C)  business expectations 
D)  sticky wages 
E)  sticky interest rates

Question 6

In the 1970s, one of the causes of stagflation was _____

Accepted Answer

A)  adverse supply shocks that shifted the aggregate supply curve left. 
B)  adverse supply shocks that shifted the aggregate supply curve right. 
C)  beneficial supply shocks that shifted the aggregate supply curve left. 
D)  beneficial supply shocks that shifted the aggregate demand curve right. 
E)  coordination failure. 
A)  adverse supply shocks that shifted the aggregate supply curve left. 
B)  adverse supply shocks that shifted the aggregate supply curve right. 
C)  beneficial supply shocks that shifted the aggregate supply curve left. 
D)  beneficial supply shocks that shifted the aggregate demand curve right. 
E)  coordination failure.

Question 7

Fiscal policy under the Reagan administration resulted in _____

Accepted Answer

A)  higher budget deficits, which increased aggregate demand. 
B)  lower budget deficits, which decreased aggregate demand. 
C)  higher budget deficits, which decreased aggregate supply. 
D)  lower budget deficits, which stimulated aggregate supply. 
E)  increased government spending, which increased aggregate supply. 
A)  higher budget deficits, which increased aggregate demand. 
B)  lower budget deficits, which decreased aggregate demand. 
C)  higher budget deficits, which decreased aggregate supply. 
D)  lower budget deficits, which stimulated aggregate supply. 
E)  increased government spending, which increased aggregate supply.

Question 8

Which of the following was a successful application of fiscal policy in the United States?

Accepted Answer

A)  Roosevelt's strategy in combating the Great Depression 
B)  the tax cut of 1964 
C)  the temporary tax surcharge of 1968 
D)  the battle against stagflation during the 1970s 
E)  the large tax cut of 1981 
A)  Roosevelt's strategy in combating the Great Depression 
B)  the tax cut of 1964 
C)  the temporary tax surcharge of 1968 
D)  the battle against stagflation during the 1970s 
E)  the large tax cut of 1981

Question 9

The unemployment problem becomes more severe if prices are sticky downward.

Accepted Answer

A) True 
 B)False

Question 10

_____ is contrary to a laissez-faire economic system.

Accepted Answer

A)  Active government intervention in all economic decisions 
B)  Reliance on prices to adjust to changing market conditions 
C)  The theory put forward by classical economics 
D)  The theory introduced by neoclassical economics 
E)  The market acting as an invisible hand 
A)  Active government intervention in all economic decisions 
B)  Reliance on prices to adjust to changing market conditions 
C)  The theory put forward by classical economics 
D)  The theory introduced by neoclassical economics 
E)  The market acting as an invisible hand

Question 11

A tax is considered to be independent of _____

Accepted Answer

A)  investment. 
B)  consumption. 
C)  government spending. 
D)  real GDP. 
E)  the price level. 
A)  investment. 
B)  consumption. 
C)  government spending. 
D)  real GDP. 
E)  the price level.

Question 12

Which of the following is most likely to close a recessionary gap in the economy?

Accepted Answer

A)  a decrease in the expenditure on infrastructure 
B)  an increase in the income tax rate 
C)  an increase in the rate of foreign exchange 
D)  a decrease in money supply 
E)  an increase in the compensation for government employees 
A)  a decrease in the expenditure on infrastructure 
B)  an increase in the income tax rate 
C)  an increase in the rate of foreign exchange 
D)  a decrease in money supply 
E)  an increase in the compensation for government employees

Question 13

In the 1970s, one of the causes of stagflation was _____

Accepted Answer

A)  rising unemployment together with economic growth. 
B)  deflation coupled with a decline in money supply. 
C)  crop failures that shifted the aggregate supply curve left. 
D)  deficits coupled with rising unemployment. 
E)  inflation coupled with balance of trade deficits. 
A)  rising unemployment together with economic growth. 
B)  deflation coupled with a decline in money supply. 
C)  crop failures that shifted the aggregate supply curve left. 
D)  deficits coupled with rising unemployment. 
E)  inflation coupled with balance of trade deficits.

Question 14

If government purchases increase and net taxes decrease, _____

Accepted Answer

A)  the price level will fall. 
B)  money supply must rise. 
C)  the aggregate demand curve shifts leftward. 
D)  aggregate supply shifts rightward. 
E)  output and employment will increase. 
A)  the price level will fall. 
B)  money supply must rise. 
C)  the aggregate demand curve shifts leftward. 
D)  aggregate supply shifts rightward. 
E)  output and employment will increase.

Question 15

The effectiveness of any stimulus program depends on _____

Accepted Answer

A)  the nature of the tax only. 
B)  the size of the tax and spending multipliers. 
C)  the nature of the tax and tax multipliers. 
D)  the income group targeted. 
E)  the marginal propensity to consume only. 
A)  the nature of the tax only. 
B)  the size of the tax and spending multipliers. 
C)  the nature of the tax and tax multipliers. 
D)  the income group targeted. 
E)  the marginal propensity to consume only.

Question 16

The American Recovery and Reinvestment Act was financed by _____

Accepted Answer

A)  decreasing the federal budget surplus spending by decreasing interest on borrowings. 
B)  increasing the federal budget deficit spending by increasing borrowings. 
C)  increasing aggregate supply. 
D)  Increasing aggregate demand. 
E)  Increasing potential GDP. 
A)  decreasing the federal budget surplus spending by decreasing interest on borrowings. 
B)  increasing the federal budget deficit spending by increasing borrowings. 
C)  increasing aggregate supply. 
D)  Increasing aggregate demand. 
E)  Increasing potential GDP.

Question 17

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that _____

Accepted Answer

A)  only discretionary fiscal policy can stimulate the economy. 
B)  only automatic stabilizers can stimulate the economy. 
C)  discretionary fiscal policy, once adopted, is built into the structure of the economy. 
D)  automatic stabilizers, once adopted, are built into the structure of the economy. 
E)  only discretionary fiscal policy can be used by the federal government. 
A)  only discretionary fiscal policy can stimulate the economy. 
B)  only automatic stabilizers can stimulate the economy. 
C)  discretionary fiscal policy, once adopted, is built into the structure of the economy. 
D)  automatic stabilizers, once adopted, are built into the structure of the economy. 
E)  only discretionary fiscal policy can be used by the federal government.

Question 18

Expansionary and contractionary gaps are automatically eliminated by shifts in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 19

Who argued that the economy should be left to itself to close a recessionary gap?

Accepted Answer

A)  John F. Kennedy 
B)  John Maynard Keynes 
C)  mercantilists 
D)  classical economists 
E)  socialists 
A)  John F. Kennedy 
B)  John Maynard Keynes 
C)  mercantilists 
D)  classical economists 
E)  socialists

Question 20

Fiscal policy used to close an expansionary gap is known as _____

Accepted Answer

A)  discretionary fiscal policy. 
B)  automatic stabilizers. 
C)  expansionary fiscal policy. 
D)  contractionary fiscal policy. 
E)  monetary policy. 
A)  discretionary fiscal policy. 
B)  automatic stabilizers. 
C)  expansionary fiscal policy. 
D)  contractionary fiscal policy. 
E)  monetary policy.

The 10-year tax cut signed by President George W. Bush in 2001 aimed to _____

An increase in government purchases must always be accompanied by an increase in autonomous net taxes to boost aggregate demand.

The steeper the short-run aggregate supply curve, _____

Which of the following best describes stagflation?

Which of the following did classical economists believe caused depressions and high unemployment?

In the 1970s, one of the causes of stagflation was _____

Fiscal policy under the Reagan administration resulted in _____

Which of the following was a successful application of fiscal policy in the United States?

The unemployment problem becomes more severe if prices are sticky downward.

_____ is contrary to a laissez-faire economic system.

A tax is considered to be independent of _____

Which of the following is most likely to close a recessionary gap in the economy?

In the 1970s, one of the causes of stagflation was _____

If government purchases increase and net taxes decrease, _____

The effectiveness of any stimulus program depends on _____

The American Recovery and Reinvestment Act was financed by _____

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that _____

Expansionary and contractionary gaps are automatically eliminated by shifts in aggregate demand.

Who argued that the economy should be left to itself to close a recessionary gap?

Fiscal policy used to close an expansionary gap is known as _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 11: Fiscal Policy.

The 10-year tax cut signed by President George W. Bush in 2001 aimed to _____

An increase in government purchases must always be accompanied by an increase in autonomous net taxes to boost aggregate demand.

The steeper the short-run aggregate supply curve, _____

Which of the following best describes stagflation?

Which of the following did classical economists believe caused depressions and high unemployment?

In the 1970s, one of the causes of stagflation was _____

Fiscal policy under the Reagan administration resulted in _____

Which of the following was a successful application of fiscal policy in the United States?

The unemployment problem becomes more severe if prices are sticky downward.

_____ is contrary to a laissez-faire economic system.

A tax is considered to be independent of _____

Which of the following is most likely to close a recessionary gap in the economy?

In the 1970s, one of the causes of stagflation was _____

If government purchases increase and net taxes decrease, _____

The effectiveness of any stimulus program depends on _____

The American Recovery and Reinvestment Act was financed by _____

The distinction between discretionary fiscal policy and the use of automatic stabilizers is that _____

Expansionary and contractionary gaps are automatically eliminated by shifts in aggregate demand.

Who argued that the economy should be left to itself to close a recessionary gap?

Fiscal policy used to close an expansionary gap is known as _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters