Question 1

If the Fed is concerned about inflation, its actions ________ long-term interest rates so that investment ________ and net exports ________.

Accepted Answer

A) lower; increases; increase 
B) lower; increases; decrease 
C) raise; decreases; decrease 
D) lower; decreases; decrease 
E) raise; increases; increase 
A) lower; increases; increase 
B) lower; increases; decrease 
C) raise; decreases; decrease 
D) lower; decreases; decrease 
E) raise; increases; increase

Question 2

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Accepted Answer

A) The real interest rate falls. 
B) Other short-term interest rates fall. 
C) Aggregate demand increases. 
D) Real GDP increases. 
E) The price level falls. 
A) The real interest rate falls. 
B) Other short-term interest rates fall. 
C) Aggregate demand increases. 
D) Real GDP increases. 
E) The price level falls.

Question 3

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Accepted Answer

A) taxes and expenditure. 
B) discretionary taxes and expenditure. 
C) government. 
D) stabilizers. 
E) discretionary policy. 
A) taxes and expenditure. 
B) discretionary taxes and expenditure. 
C) government. 
D) stabilizers. 
E) discretionary policy.

Question 4

Needs-tested spending is best described as

Accepted Answer

A) spending on programs that entitle qualified persons and businesses to receive benefits. 
B) spending on programs that have been tested in some manner. 
C) spending on programs that have proven over time to be sound investments. 
D) spending on programs that are considered necessities (needed)according to surveys of the public. 
E)  not spending at all but a reference to the reliability of budget. 
A) spending on programs that entitle qualified persons and businesses to receive benefits. 
B) spending on programs that have been tested in some manner. 
C) spending on programs that have proven over time to be sound investments. 
D) spending on programs that are considered necessities (needed)according to surveys of the public. 
E)  not spending at all but a reference to the reliability of budget.

Question 5

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes?
 Explain your answer.

Accepted Answer

The multiplier for a change in governmen

Question 6

20.3 Chapter Figures
   
The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.

Accepted Answer

A) recessionary; exactly; exactly 
B) inflationary; less than; less than 
C) recessionary; less than; more than 
D) recessionary; less than; less than 
E) recessionary; more than; more than 
A) recessionary; exactly; exactly 
B) inflationary; less than; less than 
C) recessionary; less than; more than 
D) recessionary; less than; less than 
E) recessionary; more than; more than

Question 7

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

Accepted Answer

A) deficit is $5 billion, and government debt will remain the same. 
B) surplus is $5 billion, and government debt will increase by $5 billion. 
C) deficit is $5 billion, and government debt will increase by $5 billion. 
D) deficit is $5 billion, and government debt will decrease by $5 billion. 
E) surplus is $230 billion, and the budget deficit is $235 billion. 
A) deficit is $5 billion, and government debt will remain the same. 
B) surplus is $5 billion, and government debt will increase by $5 billion. 
C) deficit is $5 billion, and government debt will increase by $5 billion. 
D) deficit is $5 billion, and government debt will decrease by $5 billion. 
E) surplus is $230 billion, and the budget deficit is $235 billion.

Question 8

If government expenditure on goods and services increase by $10 billion, then aggregate demand

Accepted Answer

A) increases by $10 billion. 
B) increases by $10 billion multiplied by the government expenditure multiplier. 
C) increases by $10 billion multiplied by the tax multiplier. 
D) decreases by $10 billion. 
E) decreases by $10 billion multiplied by the government expenditure multiplier. 
A) increases by $10 billion. 
B) increases by $10 billion multiplied by the government expenditure multiplier. 
C) increases by $10 billion multiplied by the tax multiplier. 
D) decreases by $10 billion. 
E) decreases by $10 billion multiplied by the government expenditure multiplier.

Question 9

The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) increase; do not change 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) increase; do not change

Question 10

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Accepted Answer

The federal government's budget could ha

Question 11

When tax revenue ________ outlays is positive, 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 12

If the Fed lowers the federal funds rate, eventually the

Accepted Answer

A) AD curve shifts leftward, decreasing real GDP and raising the price level. 
B) AS curve shifts leftward, decreasing real GDP and raising the price level. 
C) AD curve shifts rightward, increasing real GDP and raising the price level. 
D) AD curve shifts leftward, decreasing real GDP and lowering the price level. 
E) AS curve shifts rightward, decreasing real GDP and raising the price level. 
A) AD curve shifts leftward, decreasing real GDP and raising the price level. 
B) AS curve shifts leftward, decreasing real GDP and raising the price level. 
C) AD curve shifts rightward, increasing real GDP and raising the price level. 
D) AD curve shifts leftward, decreasing real GDP and lowering the price level. 
E) AS curve shifts rightward, decreasing real GDP and raising the price level.

Question 13

If the Fed sells government securities, other interest rates ________ and then exchange rate ________.

Accepted Answer

A) rise; does not change 
B) fall; falls 
C) do not change; rises 
D) rise; falls 
E) rise; rises 
A) rise; does not change 
B) fall; falls 
C) do not change; rises 
D) rise; falls 
E) rise; rises

Question 14

National debt decreases in a given year when a country has

Accepted Answer

A) a budget deficit. 
B) a balanced budget. 
C) a budget supplement. 
D) a budget surplus. 
E) no discretionary fiscal policy. 
A) a budget deficit. 
B) a balanced budget. 
C) a budget supplement. 
D) a budget surplus. 
E) no discretionary fiscal policy.

Question 15

Induced taxes are defined as taxes

Accepted Answer

A) we are forced to pay for services from the government. 
B) that vary with real GDP. 
C) that are avoided with the use of legal tax shelters. 
D) enacted by Congress that explicitly state the amount to be paid. 
E) that rise in recessions and fall in expansions. 
A) we are forced to pay for services from the government. 
B) that vary with real GDP. 
C) that are avoided with the use of legal tax shelters. 
D) enacted by Congress that explicitly state the amount to be paid. 
E) that rise in recessions and fall in expansions.

Question 16

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

Accepted Answer

A) surplus of $5 million. 
B) deficit of $5 million. 
C) surplus of $105 million. 
D) deficit of $105 million. 
E) surplus of $100 million and a deficit of $105 million. 
A) surplus of $5 million. 
B) deficit of $5 million. 
C) surplus of $105 million. 
D) deficit of $105 million. 
E) surplus of $100 million and a deficit of $105 million.

Question 17

When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

Accepted Answer

A) lowers; lowers 
B) lowers; raises 
C) raises; lowers 
D) raises; raises 
E) does not change; the Fed raises 
A) lowers; lowers 
B) lowers; raises 
C) raises; lowers 
D) raises; raises 
E) does not change; the Fed raises

Question 18

The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately.

Accepted Answer

A) increased; short-term; increase 
B) decreased; long-term; decrease 
C) increased; long-term; increase 
D) increased; short-term; decrease 
E) decreased; short-term; decrease 
A) increased; short-term; increase 
B) decreased; long-term; decrease 
C) increased; long-term; increase 
D) increased; short-term; decrease 
E) decreased; short-term; decrease

Question 19

When government outlays exceed tax revenue, the situation is called a budget

Accepted Answer

A) with a negative balance. 
B) deficit. 
C) surplus. 
D) debt. 
E) with no balance. 
A) with a negative balance. 
B) deficit. 
C) surplus. 
D) debt. 
E) with no balance.

Question 20

Discretionary fiscal policy is a fiscal policy action, such as

Accepted Answer

A) an interest rate cut, initiated by an act of Congress. 
B) an increase in payments to the unemployed, initiated by the state of the economy. 
C) a tax cut, initiated by an act of Congress. 
D) a decrease in tax receipts, initiated by the state of the economy. 
E) an increase in the quantity of money. 
A) an interest rate cut, initiated by an act of Congress. 
B) an increase in payments to the unemployed, initiated by the state of the economy. 
C) a tax cut, initiated by an act of Congress. 
D) a decrease in tax receipts, initiated by the state of the economy. 
E) an increase in the quantity of money.

If the Fed is concerned about inflation, its actions long-term interest rates so that investment and net exports .

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Needs-tested spending is best described as

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes? Explain your answer.

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

If government expenditure on goods and services increase by $10 billion, then aggregate demand

The supply-side effects of an income tax cut potential GDP and aggregate supply.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

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

If the Fed lowers the federal funds rate, eventually the

If the Fed sells government securities, other interest rates and then exchange rate .

National debt decreases in a given year when a country has

Induced taxes are defined as taxes

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

When the Fed worries about inflation, it the federal funds rate and, in the short run, the real interest rate.

The FOMC is concerned about inflation and has the federal funds rate. Due to substitution effects, other interest rates will almost immediately.

When government outlays exceed tax revenue, the situation is called a budget

Discretionary fiscal policy is a fiscal policy action, such as

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

If the Fed is concerned about inflation, its actions ________ long-term interest rates so that investment ________ and net exports ________.

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Needs-tested spending is best described as

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes? Explain your answer.

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

If government expenditure on goods and services increase by $10 billion, then aggregate demand

The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

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

If the Fed lowers the federal funds rate, eventually the

If the Fed sells government securities, other interest rates ________ and then exchange rate ________.

National debt decreases in a given year when a country has

Induced taxes are defined as taxes

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately.

When government outlays exceed tax revenue, the situation is called a budget

Discretionary fiscal policy is a fiscal policy action, such as

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

If the Fed is concerned about inflation, its actions long-term interest rates so that investment and net exports .

The supply-side effects of an income tax cut potential GDP and aggregate supply.

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

If the Fed sells government securities, other interest rates and then exchange rate .

When the Fed worries about inflation, it the federal funds rate and, in the short run, the real interest rate.

The FOMC is concerned about inflation and has the federal funds rate. Due to substitution effects, other interest rates will almost immediately.