Question 1

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Accepted Answer

A)  rose; fell; risen 
B)  fell; fell; risen 
C)  rose; rose; fallen 
D)  fell; rose; fallen 
A)  rose; fell; risen 
B)  fell; fell; risen 
C)  rose; rose; fallen 
D)  fell; rose; fallen

Question 2

Which of the following is an example of discretionary fiscal policy?

Accepted Answer

A)  an increase in unemployment insurance payments during a recession 
B)  an increase in income tax receipts with rising income during an expansion 
C)  the tax cuts passed by Congress in 2001 to combat the recession 
D)  a decrease in food stamps issued during an expansion or boom 
A)  an increase in unemployment insurance payments during a recession 
B)  an increase in income tax receipts with rising income during an expansion 
C)  the tax cuts passed by Congress in 2001 to combat the recession 
D)  a decrease in food stamps issued during an expansion or boom

Question 3

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is considered expansionary fiscal policy?

Accepted Answer

A)  Congress decreases the income tax rate. 
B)  Congress increases defense spending. 
C)  Legislation increases a college tuition deduction from federal income taxes. 
D)  The Arizona legislature cuts highway spending to balance its budget. 
A)  Congress decreases the income tax rate. 
B)  Congress increases defense spending. 
C)  Legislation increases a college tuition deduction from federal income taxes. 
D)  The Arizona legislature cuts highway spending to balance its budget.

Question 5

Which of the following is a government expenditure,but is not a government purchase?

Accepted Answer

A)  The federal government buys a Humvee. 
B)  The federal government pays the salary of an FBI agent. 
C)  The federal government pays out an unemployment insurance claim. 
D)  The Federal government pays to support research on Aids. 
A)  The federal government buys a Humvee. 
B)  The federal government pays the salary of an FBI agent. 
C)  The federal government pays out an unemployment insurance claim. 
D)  The Federal government pays to support research on Aids.

Question 6

How could the existence of an unemployment insurance system or other transfer programs have reduced the severity of the Great Depression?

Accepted Answer

If these programs existed during the Gre

Question 7

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

Accepted Answer

A)  $500 billion. 
B)  less than $500 billion. 
C)  more than $500 billion. 
D)  None of the above are correct. Congress must act to decrease government purchases in this case. 
A)  $500 billion. 
B)  less than $500 billion. 
C)  more than $500 billion. 
D)  None of the above are correct. Congress must act to decrease government purchases in this case.

Question 8

If the government purchases multiplier equals 2,and real GDP is $14 trillion with potential real GDP $14.5 trillion,then government purchases would need to increase by ________ to restore the economy to potential real GDP.

Accepted Answer

A)  $7.25 trillion 
B)  $1 trillion 
C)  $500 billion 
D)  $250 billion 
A)  $7.25 trillion 
B)  $1 trillion 
C)  $500 billion 
D)  $250 billion

Question 9

The larger the marginal propensity to import,the smaller the government purchases multiplier.

Accepted Answer

A) True 
 B)False

Question 10

Forecasts by the Congressional Budget Office show spending on Social Security,Medicare,and Medicaid rising from 10.4 percent of GDP in 2010 to ________ percent of GDP in 2050,and by 2050 the federal government will be spending,as a fraction of GDP,________ on these three programs as it currently spends on all its programs.

Accepted Answer

A)  15.2 percent; more 
B)  15.2 percent; half as much 
C)  18.9 percent; more 
D)  18.9 percent; half as much 
A)  15.2 percent; more 
B)  15.2 percent; half as much 
C)  18.9 percent; more 
D)  18.9 percent; half as much

Question 11

An increase in government spending increases the supply of money in our economy.

Accepted Answer

A) True 
 B)False

Question 12

Figure 27-5
  
-Refer to Figure 27-5.In the graph above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Congress and the president use to move the economy to point C?

Accepted Answer

A)  increase government purchases 
B)  decrease government purchases 
C)  increase income taxes 
D)  sell Treasury bills 
A)  increase government purchases 
B)  decrease government purchases 
C)  increase income taxes 
D)  sell Treasury bills

Question 13

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

Accepted Answer

A)  higher interest rates and a lower exchange rate. 
B)  higher interest rates and a higher exchange rate. 
C)  lower interest rates and a lower exchange rate. 
D)  lower interest rates and a higher exchange rate. 
A)  higher interest rates and a lower exchange rate. 
B)  higher interest rates and a higher exchange rate. 
C)  lower interest rates and a lower exchange rate. 
D)  lower interest rates and a higher exchange rate.

Question 14

An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by

Accepted Answer

A)  $200 billion. 
B)  less than $200 billion. 
C)  more than $200 billion. 
D)  None of the above are correct. This policy shifts the long-run aggregate supply curve. 
A)  $200 billion. 
B)  less than $200 billion. 
C)  more than $200 billion. 
D)  None of the above are correct. This policy shifts the long-run aggregate supply curve.

Question 15

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of ________ and two-thirds took the form of increases in ________.

Accepted Answer

A)  discretionary government spending; transfer payments 
B)  tax rebates; tax cuts 
C)  treasury bond purchases; the money supply 
D)  tax cuts; government expenditures 
A)  discretionary government spending; transfer payments 
B)  tax rebates; tax cuts 
C)  treasury bond purchases; the money supply 
D)  tax cuts; government expenditures

Question 16

Government deficits tend to increase during

Accepted Answer

A)  recessions and booms. 
B)  periods of war and recession. 
C)  periods of below- or above-average growth. 
D)  periods of increased financial uncertainty. 
A)  recessions and booms. 
B)  periods of war and recession. 
C)  periods of below- or above-average growth. 
D)  periods of increased financial uncertainty.

Question 17

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Accepted Answer

A) True 
 B)False

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.

Which of the following is an example of discretionary fiscal policy?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Which of the following is considered expansionary fiscal policy?

Which of the following is a government expenditure,but is not a government purchase?

How could the existence of an unemployment insurance system or other transfer programs have reduced the severity of the Great Depression?

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

If the government purchases multiplier equals 2,and real GDP is $14 trillion with potential real GDP $14.5 trillion,then government purchases would need to increase by ________ to restore the economy to potential real GDP.

The larger the marginal propensity to import,the smaller the government purchases multiplier.

An increase in government spending increases the supply of money in our economy.

Figure 27-5 -Refer to Figure 27-5.In the graph above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Congress and the president use to move the economy to point C?

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of and two-thirds took the form of increases in .

Government deficits tend to increase during

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 16: Fiscal Policy

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Which of the following is an example of discretionary fiscal policy?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Which of the following is considered expansionary fiscal policy?

Which of the following is a government expenditure,but is not a government purchase?

How could the existence of an unemployment insurance system or other transfer programs have reduced the severity of the Great Depression?

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to increase government purchases by

If the government purchases multiplier equals 2,and real GDP is $14 trillion with potential real GDP $14.5 trillion,then government purchases would need to increase by ________ to restore the economy to potential real GDP.

The larger the marginal propensity to import,the smaller the government purchases multiplier.

An increase in government spending increases the supply of money in our economy.

Figure 27-5 -Refer to Figure 27-5.In the graph above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Congress and the president use to move the economy to point C?

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of ________ and two-thirds took the form of increases in ________.

Government deficits tend to increase during

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

As a percentage of GDP,federal expenditures from 1950 to the early 1990s, from 1992 to 2001,and have since 2001.

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of and two-thirds took the form of increases in .