Question 1

To combat a recession, fiscal policy should move toward a budget that is

Accepted Answer

A)  balanced 
B)  in a deficit 
C)  in a surplus 
D)  as low as possible 
A)  balanced 
B)  in a deficit 
C)  in a surplus 
D)  as low as possible

Question 2

______ is the deliberate use of changes in government expenditures and taxation to affect aggregate demand and influence the economy's performance.

Accepted Answer

A)  Discretionary fiscal policy 
B)  Nondiscretionary fiscal policy 
C)  Discretionary monetary policy 
D)  Nondiscretionary monetary policy 
A)  Discretionary fiscal policy 
B)  Nondiscretionary fiscal policy 
C)  Discretionary monetary policy 
D)  Nondiscretionary monetary policy

Question 3

If the U.S. government spends $20 billion on unemployment compensation benefits, purchases $75 billion of goods and services, and collects taxes of $100 billion, then there is a budget

Accepted Answer

A)  surplus of $15 billion 
B)  surplus of $5 billion 
C)  deficit of $5 billion 
D)  deficit of $10 billion 
A)  surplus of $15 billion 
B)  surplus of $5 billion 
C)  deficit of $5 billion 
D)  deficit of $10 billion

Question 4

According to the foreign-trade effect, an expansionary fiscal policy that boosts interest rates will cause net exports to decrease, partially offsetting the expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 5

Advocates of supply-side economics believe that which of the following concepts is of crucial importance?

Accepted Answer

A)  public-works projects 
B)  discretionary fiscal policy 
C)  marginal tax rates 
D)  automatic stabilizers 
A)  public-works projects 
B)  discretionary fiscal policy 
C)  marginal tax rates 
D)  automatic stabilizers

Question 6

In 2006, 73 percent of the federal debt was owned by foreign investors.

Accepted Answer

A) True 
 B)False

Question 7

The crowding-out effect occurs when increased government expenditures and the subsequent budget deficits cause

Accepted Answer

A)  the money supply to increase, which curtails loans to consumers 
B)  interest rates to increase, which reduces investment spending 
C)  inflation, which erodes the purchasing power of the dollar 
D)  the imports of goods and services to rise, and exports to decline 
A)  the money supply to increase, which curtails loans to consumers 
B)  interest rates to increase, which reduces investment spending 
C)  inflation, which erodes the purchasing power of the dollar 
D)  the imports of goods and services to rise, and exports to decline

Question 8

Discretionary fiscal policy affects all the following except

Accepted Answer

A)  consumption 
B)  investment 
C)  net exports 
D)  money supply 
A)  consumption 
B)  investment 
C)  net exports 
D)  money supply

Question 9

The multiplier effect that applies to changes in household taxes is larger than the one that applies to changes in government expenditures.

Accepted Answer

A) True 
 B)False

Question 10

If people are spending all the available money, when the U.S. government borrows to finance a deficit,

Accepted Answer

A)  investment spending increases 
B)  personal consumption spending increases 
C)  interest rates increase 
D)  the exchange value of the dollar declines 
A)  investment spending increases 
B)  personal consumption spending increases 
C)  interest rates increase 
D)  the exchange value of the dollar declines

Question 11

When there are automatic stabilizers,

Accepted Answer

A)  the government decreases tax rates as the economy slides into a recession 
B)  the government increases tax rates as the economy slides into a recession 
C)  tax receipts increase as the economy slides into a recession 
D)  tax receipts decrease as the economy slides into a recession 
A)  the government decreases tax rates as the economy slides into a recession 
B)  the government increases tax rates as the economy slides into a recession 
C)  tax receipts increase as the economy slides into a recession 
D)  tax receipts decrease as the economy slides into a recession

Question 12

Critics of a large national debt are concerned that it will do all of the following except:

Accepted Answer

A)  result in the crowding out of investment in the private sector 
B)  slow down the economy's long-run rate of growth 
C)  redistribute income from the wealthy to the poor 
D)  reduce the living standards of future generations 
A)  result in the crowding out of investment in the private sector 
B)  slow down the economy's long-run rate of growth 
C)  redistribute income from the wealthy to the poor 
D)  reduce the living standards of future generations

Question 13

During the 2007-09 recession, the official unemployment rate rose

Accepted Answer

A)  over 9% 
B)  11% 
C)  over 13% 
D)  over 15% 
A)  over 9% 
B)  11% 
C)  over 13% 
D)  over 15%

Question 14

Automatic stabilizers work by preventing aggregate demand from decreasing as much in bad times and rising as much in good times, thus helping to stabilize the economy.

Accepted Answer

A) True 
 B)False

Question 15

Concerning an annually balanced budget law, if the U.S. government balanced its budget each year, then it would

Accepted Answer

A)  eliminate a recession by increasing expenditures and decreasing taxes during a recession 
B)  eliminate a recession by decreasing expenditures and increasing taxes during a recession 
C)  intensify a recession by decreasing expenditures and increasing taxes during a recession 
D)  intensify a recession by increasing expenditures and decreasing taxes during a recession 
A)  eliminate a recession by increasing expenditures and decreasing taxes during a recession 
B)  eliminate a recession by decreasing expenditures and increasing taxes during a recession 
C)  intensify a recession by decreasing expenditures and increasing taxes during a recession 
D)  intensify a recession by increasing expenditures and decreasing taxes during a recession

Question 16

If the federal government's budget is initially balanced, a fiscal policy that combats a recession would cause the budget to move into a surplus.

Accepted Answer

A) True 
 B)False

Question 17

The ______ shows the relationship between the income tax rate that a government imposes and the total tax revenue that the government collects.

Accepted Answer

A)  fiscal curve 
B)  automatic stabilizer curve 
C)  transfer curve 
D)  Laffer curve 
A)  fiscal curve 
B)  automatic stabilizer curve 
C)  transfer curve 
D)  Laffer curve

Question 18

Fiscal policy is a legal mandate of the federal government as a result of the Employment Act of 1946 and the Humphry-Hawkins Act of 1978.

Accepted Answer

A) True 
 B)False

Question 19

To combat inflation, discretional fiscal policy could result in a(n)

Accepted Answer

A)  increase in taxes, a decrease in government expenditures, and a rightward shift in the aggregate demand curve 
B)  decrease in taxes, a decrease in government expenditures, and a rightward shift in the aggregate demand curve 
C)  increase in taxes, a decrease in government expenditures, and a leftward shift in the aggregate demand curve 
D)  decrease in taxes, an increase in government expenditures, and a rightward shift in the aggregate demand curve 
A)  increase in taxes, a decrease in government expenditures, and a rightward shift in the aggregate demand curve 
B)  decrease in taxes, a decrease in government expenditures, and a rightward shift in the aggregate demand curve 
C)  increase in taxes, a decrease in government expenditures, and a leftward shift in the aggregate demand curve 
D)  decrease in taxes, an increase in government expenditures, and a rightward shift in the aggregate demand curve

Question 20

An expansionary fiscal policy tends to increase

Accepted Answer

A)  real output and employment, but not income 
B)  real output and income, but not employment 
C)  income and employment, but not real output 
D)  real output, employment, and income 
A)  real output and employment, but not income 
B)  real output and income, but not employment 
C)  income and employment, but not real output 
D)  real output, employment, and income

To combat a recession, fiscal policy should move toward a budget that is

______ is the deliberate use of changes in government expenditures and taxation to affect aggregate demand and influence the economy's performance.

If the U.S. government spends $20 billion on unemployment compensation benefits, purchases $75 billion of goods and services, and collects taxes of $100 billion, then there is a budget

According to the foreign-trade effect, an expansionary fiscal policy that boosts interest rates will cause net exports to decrease, partially offsetting the expansionary fiscal policy.

Advocates of supply-side economics believe that which of the following concepts is of crucial importance?

In 2006, 73 percent of the federal debt was owned by foreign investors.

The crowding-out effect occurs when increased government expenditures and the subsequent budget deficits cause

Discretionary fiscal policy affects all the following except

The multiplier effect that applies to changes in household taxes is larger than the one that applies to changes in government expenditures.

If people are spending all the available money, when the U.S. government borrows to finance a deficit,

When there are automatic stabilizers,

Critics of a large national debt are concerned that it will do all of the following except:

During the 2007-09 recession, the official unemployment rate rose

Automatic stabilizers work by preventing aggregate demand from decreasing as much in bad times and rising as much in good times, thus helping to stabilize the economy.

Concerning an annually balanced budget law, if the U.S. government balanced its budget each year, then it would

If the federal government's budget is initially balanced, a fiscal policy that combats a recession would cause the budget to move into a surplus.

The ______ shows the relationship between the income tax rate that a government imposes and the total tax revenue that the government collects.

Fiscal policy is a legal mandate of the federal government as a result of the Employment Act of 1946 and the Humphry-Hawkins Act of 1978.

To combat inflation, discretional fiscal policy could result in a(n)

An expansionary fiscal policy tends to increase

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters

Exam 13: Fiscal Policy and the Federal Budget

To combat a recession, fiscal policy should move toward a budget that is

______ is the deliberate use of changes in government expenditures and taxation to affect aggregate demand and influence the economy's performance.

If the U.S. government spends $20 billion on unemployment compensation benefits, purchases $75 billion of goods and services, and collects taxes of $100 billion, then there is a budget

According to the foreign-trade effect, an expansionary fiscal policy that boosts interest rates will cause net exports to decrease, partially offsetting the expansionary fiscal policy.

Advocates of supply-side economics believe that which of the following concepts is of crucial importance?

In 2006, 73 percent of the federal debt was owned by foreign investors.

The crowding-out effect occurs when increased government expenditures and the subsequent budget deficits cause

Discretionary fiscal policy affects all the following except

The multiplier effect that applies to changes in household taxes is larger than the one that applies to changes in government expenditures.

If people are spending all the available money, when the U.S. government borrows to finance a deficit,

When there are automatic stabilizers,

Critics of a large national debt are concerned that it will do all of the following except:

During the 2007-09 recession, the official unemployment rate rose

Automatic stabilizers work by preventing aggregate demand from decreasing as much in bad times and rising as much in good times, thus helping to stabilize the economy.

Concerning an annually balanced budget law, if the U.S. government balanced its budget each year, then it would

If the federal government's budget is initially balanced, a fiscal policy that combats a recession would cause the budget to move into a surplus.

The ______ shows the relationship between the income tax rate that a government imposes and the total tax revenue that the government collects.

Fiscal policy is a legal mandate of the federal government as a result of the Employment Act of 1946 and the Humphry-Hawkins Act of 1978.

To combat inflation, discretional fiscal policy could result in a(n)

An expansionary fiscal policy tends to increase

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters