Question 1

The FOMC is the

Accepted Answer

A) report the Fed gives to Congress twice a year. 
B) group within the Fed that makes monetary policy. 
C) report that summarizes the economy across Fed districts. 
D) name of the meeting the Fed has with Congress twice a year. 
E) interest rate the Fed most directly influences. 
A) report the Fed gives to Congress twice a year. 
B) group within the Fed that makes monetary policy. 
C) report that summarizes the economy across Fed districts. 
D) name of the meeting the Fed has with Congress twice a year. 
E) interest rate the Fed most directly influences. B

Question 2

In the United States,

Accepted Answer

A) Congress must approve monetary policy changes. 
B) Congress initializes changes in monetary policy and the Fed approves the changes. 
C) the Federal Reserve sets monetary policy. 
D) the Federal Reserve sets monetary and fiscal policies. 
E) the President initializes changes in monetary policy and the Fed approves the changes. 
A) Congress must approve monetary policy changes. 
B) Congress initializes changes in monetary policy and the Fed approves the changes. 
C) the Federal Reserve sets monetary policy. 
D) the Federal Reserve sets monetary and fiscal policies. 
E) the President initializes changes in monetary policy and the Fed approves the changes. C

Question 3

Which of the following is true?

Accepted Answer

A) Automatic stabilizers are used to eliminate recessions. 
B) Discretionary fiscal policy cannot eliminate a recession. 
C) Automatic stabilizers help to reduce the impact of a recession. 
D) Discretionary fiscal policy can automatically eliminate a recession. 
E) Automatic stabilizers make discretionary policy more effective by increasing the magnitude of the multipliers. 
A) Automatic stabilizers are used to eliminate recessions. 
B) Discretionary fiscal policy cannot eliminate a recession. 
C) Automatic stabilizers help to reduce the impact of a recession. 
D) Discretionary fiscal policy can automatically eliminate a recession. 
E) Automatic stabilizers make discretionary policy more effective by increasing the magnitude of the multipliers. C

Question 4

An example of automatic fiscal policy is

Accepted Answer

A) an interest rate cut, initiated by an act of Congress. 
B) an increase in the quantity of money. 
C) a tax cut, initiated by an act of Congress. 
D) a decrease in tax revenues, triggered by the state of the economy. 
E) any change in the interest rate, regardless of its cause. 
A) an interest rate cut, initiated by an act of Congress. 
B) an increase in the quantity of money. 
C) a tax cut, initiated by an act of Congress. 
D) a decrease in tax revenues, triggered by the state of the economy. 
E) any change in the interest rate, regardless of its cause.

Question 5

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession. To move the economy back to its potential GDP, the most likely policy action for the Fed is to ________ the federal funds and thus ________ .

Accepted Answer

A) raise; increase aggregate demand 
B) raise; decrease aggregate demand 
C) lower; increase aggregate supply 
D) lower; decrease aggregate supply 
E) lower; increase aggregate demand 
A) raise; increase aggregate demand 
B) raise; decrease aggregate demand 
C) lower; increase aggregate supply 
D) lower; decrease aggregate supply 
E) lower; increase aggregate demand

Question 6

If the government reduces expenditure on goods and services by $30 billion, then aggregate demand

Accepted Answer

A) decreases by more than $30 billion and real GDP decreases. 
B) decreases by $30 billion and real GDP decreases. 
C) increases by $30 billion and real GDP increases. 
D) increases and potential GDP increases. 
E) increases by more than $30 billion and real GDP increases. 
A) decreases by more than $30 billion and real GDP decreases. 
B) decreases by $30 billion and real GDP decreases. 
C) increases by $30 billion and real GDP increases. 
D) increases and potential GDP increases. 
E) increases by more than $30 billion and real GDP increases.

Question 7

Taxes that change with the level of real GDP and income are called

Accepted Answer

A) voluntary taxes. 
B) GDP taxes. 
C) induced taxes. 
D) forced taxes. 
E) flexible taxes. 
A) voluntary taxes. 
B) GDP taxes. 
C) induced taxes. 
D) forced taxes. 
E) flexible taxes.

Question 8

When tax revenues equal government outlays, the situation is referred to as

Accepted Answer

A) a balanced budget. 
B) an equivalent budget. 
C) an equal budget. 
D) an equilibrium budget. 
E) a legal budget. 
A) a balanced budget. 
B) an equivalent budget. 
C) an equal budget. 
D) an equilibrium budget. 
E) a legal budget.

Question 9

If the federal government has a budget deficit, then it is definitely the case that

Accepted Answer

A) the tax revenue exceed government outlays. 
B) the tax revenue and government outlays are equal. 
C) the tax revenue is falling and government outlays are rising. 
D) government outlays exceed tax revenue. 
E) the tax revenue is rising and government outlays are falling. 
A) the tax revenue exceed government outlays. 
B) the tax revenue and government outlays are equal. 
C) the tax revenue is falling and government outlays are rising. 
D) government outlays exceed tax revenue. 
E) the tax revenue is rising and government outlays are falling.

Question 10

The balanced budget multiplier is

Accepted Answer

A) positive because the magnitude of government expenditure multiplier is larger than the magnitude of tax multiplier. 
B) negative because the magnitude of government expenditure multiplier is larger than the magnitude of the tax multiplier. 
C) positive because the magnitude of government expenditure multiplier is smaller than the magnitude of tax multiplier. 
D) equal to zero. 
E) negative because the magnitude of the tax multiplier is larger than the magnitude of the government expenditure multiplier. 
A) positive because the magnitude of government expenditure multiplier is larger than the magnitude of tax multiplier. 
B) negative because the magnitude of government expenditure multiplier is larger than the magnitude of the tax multiplier. 
C) positive because the magnitude of government expenditure multiplier is smaller than the magnitude of tax multiplier. 
D) equal to zero. 
E) negative because the magnitude of the tax multiplier is larger than the magnitude of the government expenditure multiplier.

Question 11

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

Accepted Answer

Starting in the early 1970s, the federal

Question 12

An income tax hike

Accepted Answer

A) increases potential GDP. 
B) increases employment. 
C) decreases potential GDP. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct. 
A) increases potential GDP. 
B) increases employment. 
C) decreases potential GDP. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct.

Question 13

An economy is experiencing a recession and policy makers are considering using discretionary fiscal policy to eliminate the recessionary gap. What are the four limitations that policymakers face when using discretionary fiscal policy?
 Briefly discuss each.

Accepted Answer

The limitations are law-making time lags

Question 14

Automatic stabilizers include

Accepted Answer

A) changes in induced taxes and changes in needs-tested spending. 
B) increases or decreases of tax rates and changes in needs-tested spending. 
C) changes in induced taxes and changes in discretionary spending. 
D) changes in discretionary spending and changes in needs-tested spending. 
E) changes in the federal funds interest rate brought about by Fed policy. 
A) changes in induced taxes and changes in needs-tested spending. 
B) increases or decreases of tax rates and changes in needs-tested spending. 
C) changes in induced taxes and changes in discretionary spending. 
D) changes in discretionary spending and changes in needs-tested spending. 
E) changes in the federal funds interest rate brought about by Fed policy.

Question 15

-The national debt is

Accepted Answer

A) tax revenue minus government outlays. 
B) government outlays minus tax revenue. 
C) the amount borrowed by the government to finance past budget deficits. 
D) the amount lent by the government of past budget surpluses. 
E) the excess of this year's budget surplus minus this year's budget deficit. 
A) tax revenue minus government outlays. 
B) government outlays minus tax revenue. 
C) the amount borrowed by the government to finance past budget deficits. 
D) the amount lent by the government of past budget surpluses. 
E) the excess of this year's budget surplus minus this year's budget deficit.

Question 16

If the Fed is concerned about a possible recession, it ________ the federal funds rate and, in response, long-term interest rates ________ by a ________ amount than the change in short-term rates.

Accepted Answer

A) raises; increase; larger 
B) lowers; increase; smaller 
C) raises; decrease; larger 
D) lowers; decrease; smaller 
E) raises; increase; smaller 
A) raises; increase; larger 
B) lowers; increase; smaller 
C) raises; decrease; larger 
D) lowers; decrease; smaller 
E) raises; increase; smaller

Question 17

Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

Accepted Answer

A) reduce the interest rate and so allow firms to increase their level of investment. 
B) increase taxes so the budget is always balanced. 
C) raise the exchange rate so U.S. exports become more attractive to foreigners. 
D) mean disposable income does not change by as much as real GDP. 
E) increase the quantity of money in circulation. 
A) reduce the interest rate and so allow firms to increase their level of investment. 
B) increase taxes so the budget is always balanced. 
C) raise the exchange rate so U.S. exports become more attractive to foreigners. 
D) mean disposable income does not change by as much as real GDP. 
E) increase the quantity of money in circulation.

Question 18

When tax revenue ________ outlays is negative, then the government has a budget ________.

Accepted Answer

A) minus; surplus 
B) divided by; surplus 
C) minus; deficit 
D) plus; deficit 
E) plus; surplus 
A) minus; surplus 
B) divided by; surplus 
C) minus; deficit 
D) plus; deficit 
E) plus; surplus

Question 19

Discretionary fiscal policy is handicapped by

Accepted Answer

A) law-making time lags, induced taxes, and automatic stabilizers. 
B) law-making time lags, estimation of potential GDP, and economic forecasting. 
C) economic forecasting, law-making time lags, and induced taxes. 
D) automatic stabilizers, law-making time lags, and potential GDP estimation. 
E) automatic stabilizers, the multipliers, and potential GDP estimation. 
A) law-making time lags, induced taxes, and automatic stabilizers. 
B) law-making time lags, estimation of potential GDP, and economic forecasting. 
C) economic forecasting, law-making time lags, and induced taxes. 
D) automatic stabilizers, law-making time lags, and potential GDP estimation. 
E) automatic stabilizers, the multipliers, and potential GDP estimation.

Question 20

In an expansion, federal tax receipts increase proportionally more than real GDP without the need for any government policy. This increase is an example of

Accepted Answer

A) discretionary monetary policy. 
B) automatic monetary policy. 
C) automatic fiscal policy. 
D) discretionary fiscal policy. 
E) the effect of deficit spending. 
A) discretionary monetary policy. 
B) automatic monetary policy. 
C) automatic fiscal policy. 
D) discretionary fiscal policy. 
E) the effect of deficit spending.

The FOMC is the

In the United States,

Which of the following is true?

An example of automatic fiscal policy is

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession. To move the economy back to its potential GDP, the most likely policy action for the Fed is to the federal funds and thus .

If the government reduces expenditure on goods and services by $30 billion, then aggregate demand

Taxes that change with the level of real GDP and income are called

When tax revenues equal government outlays, the situation is referred to as

If the federal government has a budget deficit, then it is definitely the case that

The balanced budget multiplier is

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

An income tax hike

An economy is experiencing a recession and policy makers are considering using discretionary fiscal policy to eliminate the recessionary gap. What are the four limitations that policymakers face when using discretionary fiscal policy? Briefly discuss each.

Automatic stabilizers include

-The national debt is

If the Fed is concerned about a possible recession, it the federal funds rate and, in response, long-term interest rates by a amount than the change in short-term rates.

Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

When tax revenue outlays is negative, then the government has a budget .

Discretionary fiscal policy is handicapped by

In an expansion, federal tax receipts increase proportionally more than real GDP without the need for any government policy. This increase is an example of

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Filters

Exam 20: Fiscal Policy and Monetary Policy

The FOMC is the

In the United States,

Which of the following is true?

An example of automatic fiscal policy is

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession. To move the economy back to its potential GDP, the most likely policy action for the Fed is to ________ the federal funds and thus ________ .

If the government reduces expenditure on goods and services by $30 billion, then aggregate demand

Taxes that change with the level of real GDP and income are called

When tax revenues equal government outlays, the situation is referred to as

If the federal government has a budget deficit, then it is definitely the case that

The balanced budget multiplier is

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

An income tax hike

An economy is experiencing a recession and policy makers are considering using discretionary fiscal policy to eliminate the recessionary gap. What are the four limitations that policymakers face when using discretionary fiscal policy? Briefly discuss each.

Automatic stabilizers include

-The national debt is

If the Fed is concerned about a possible recession, it ________ the federal funds rate and, in response, long-term interest rates ________ by a ________ amount than the change in short-term rates.

Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

When tax revenue ________ outlays is negative, then the government has a budget ________.

Discretionary fiscal policy is handicapped by

In an expansion, federal tax receipts increase proportionally more than real GDP without the need for any government policy. This increase is an example of

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Filters

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession. To move the economy back to its potential GDP, the most likely policy action for the Fed is to the federal funds and thus .

If the Fed is concerned about a possible recession, it the federal funds rate and, in response, long-term interest rates by a amount than the change in short-term rates.

When tax revenue outlays is negative, then the government has a budget .