Question 1

-In the above figure,if actual GDP = $15 trillion,there is a budget ________ equal to ________.

Accepted Answer

A)  surplus; $0.2 trillion 
B)  surplus; $1.3 trillion 
C)  deficit; $0.2 trillion 
D)  deficit; $1.1 trillion 
A)  surplus; $0.2 trillion 
B)  surplus; $1.3 trillion 
C)  deficit; $0.2 trillion 
D)  deficit; $1.1 trillion

Question 2

Taxes and government expenditures that,without need for additional government action,change in response to changes in the level of economic activity are examples of

Accepted Answer

A)  discretionary fiscal variables. 
B)  automatic fiscal policy. 
C)  built-in monetary stabilizers. 
D)  cyclically balanced budgets. 
A)  discretionary fiscal variables. 
B)  automatic fiscal policy. 
C)  built-in monetary stabilizers. 
D)  cyclically balanced budgets.

Question 3

Between 2000 and 2005,Finland increased its tax on interest income. As a result,the supply curve for loanable funds shifted ________ and the tax wedge ________.

Accepted Answer

A)  leftward; increased 
B)  rightward; increased 
C)  leftward; decreased 
D)  rightward; decreased 
A)  leftward; increased 
B)  rightward; increased 
C)  leftward; decreased 
D)  rightward; decreased

Question 4

An increase in the tax on interest income ________ the supply of loanable funds and ________ the equilibrium investment.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 5

-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point

Accepted Answer

A)  move to point C. 
B)  move to point A. 
C)  move to point B. 
D)  stay at point D. 
A)  move to point C. 
B)  move to point A. 
C)  move to point B. 
D)  stay at point D.

Question 6

What is the largest source of revenue for the federal government?

Accepted Answer

A)  Social Security taxes 
B)  corporate income taxes 
C)  personal income taxes 
D)  sales tax 
A)  Social Security taxes 
B)  corporate income taxes 
C)  personal income taxes 
D)  sales tax

Question 7

If a tax cut increases people's labor supply,then

Accepted Answer

A)  tax cuts increase potential GDP. 
B)  tax cuts decrease aggregate demand. 
C)  tax cuts cannot affect aggregate demand. 
D)  Both answers A and B are correct. 
A)  tax cuts increase potential GDP. 
B)  tax cuts decrease aggregate demand. 
C)  tax cuts cannot affect aggregate demand. 
D)  Both answers A and B are correct.

Question 8

Automatic fiscal policy is at work if,as real GDP increases,________.

Accepted Answer

A)  transfer payments decrease and interest rates decrease 
B)  transfer payments increase and tax revenues decrease 
C)  tax revenues increase and transfer payments decrease 
D)  tax revenues decrease and interest rates increase 
A)  transfer payments decrease and interest rates decrease 
B)  transfer payments increase and tax revenues decrease 
C)  tax revenues increase and transfer payments decrease 
D)  tax revenues decrease and interest rates increase

Question 9

Suppose that real GDP equals potential GDP,but the government believes that the economy is in a below full-employment equilibrium.As a result,the government increases its expenditure on goods and services.In response to the government's fiscal policy,

Accepted Answer

A)  aggregate demand will increase. 
B)  an equilibrium with real GDP less than potential GDP will occur. 
C)  potential GDP decreases. 
D)  None of the above answers is correct. 
A)  aggregate demand will increase. 
B)  an equilibrium with real GDP less than potential GDP will occur. 
C)  potential GDP decreases. 
D)  None of the above answers is correct.

Question 10

The largest component of the fiscal imbalance is

Accepted Answer

A)  Social Security. 
B)  Medicare. 
C)  Defense spending. 
D)  none of the above 
A)  Social Security. 
B)  Medicare. 
C)  Defense spending. 
D)  none of the above

Question 11

Expenditures such as Social Security benefits,farm subsidies and grants are considered

Accepted Answer

A)  expenditures on goods and services 
B)  transfer payments 
C)  debt reduction 
D)  debt interest 
A)  expenditures on goods and services 
B)  transfer payments 
C)  debt reduction 
D)  debt interest

Question 12

The purpose of the Employment Act of 1946 was to

Accepted Answer

A)  establish goals for the federal government that would promote maximum employment, purchasing power, and production. 
B)  establish an unemployment compensation system. 
C)  set up the Federal Reserve System. 
D)  set targets for the unemployment rate to be achieved by the president. 
A)  establish goals for the federal government that would promote maximum employment, purchasing power, and production. 
B)  establish an unemployment compensation system. 
C)  set up the Federal Reserve System. 
D)  set targets for the unemployment rate to be achieved by the president.

Question 13

$$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

Accepted Answer

A)  $15 billion deficit 
B)  $35 billion surplus 
C)  $5 billion surplus 
D)  $325 billion surplus 
A)  $15 billion deficit 
B)  $35 billion surplus 
C)  $5 billion surplus 
D)  $325 billion surplus

Question 14

An increase in taxes on labor income decreases potential GDP.

Accepted Answer

A) True 
 B)False

Question 15

The ________ the interest rate,the ________ the present value of a given future amount.

Accepted Answer

A)  higher; larger 
B)  higher; smaller 
C)  lower; lower 
D)  None of the above answers is correct because the interest rate has nothing to do with the present value. 
A)  higher; larger 
B)  higher; smaller 
C)  lower; lower 
D)  None of the above answers is correct because the interest rate has nothing to do with the present value.

Question 16

A budget surplus occurs when government

Accepted Answer

A)  outlays exceeds tax revenues. 
B)  tax revenues exceeds outlays. 
C)  tax revenues equals outlays. 
D)  tax revenues equal social security expenditures. 
A)  outlays exceeds tax revenues. 
B)  tax revenues exceeds outlays. 
C)  tax revenues equals outlays. 
D)  tax revenues equal social security expenditures.

Question 17

If the government's budget is in surplus even when the economy is at full employment,the surplus is said to be

Accepted Answer

A)  persisting. 
B)  cyclical. 
C)  discretionary. 
D)  structural. 
A)  persisting. 
B)  cyclical. 
C)  discretionary. 
D)  structural.

Question 18

$$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 2 by the government shown in the above table?

Accepted Answer

A)  $0 
B)  $5 billion surplus 
C)  $5 billion deficit 
D)  $250 billion surplus 
A)  $0 
B)  $5 billion surplus 
C)  $5 billion deficit 
D)  $250 billion surplus

Question 19

Comparing the U.S.budget position for 2012 to the rest of the world,we see that as a percentage of GDP,the ________ than in most other countries.

Accepted Answer

A)  U.S. budget deficit is smaller 
B)  U.S. budget deficit is larger 
C)  U.S. budget surplus is smaller 
D)  U.S. budget surplus is larger 
A)  U.S. budget deficit is smaller 
B)  U.S. budget deficit is larger 
C)  U.S. budget surplus is smaller 
D)  U.S. budget surplus is larger

Question 20

The Laffer curve is the relationship between

Accepted Answer

A)  government purchases and potential GDP. 
B)  tax rates and potential GDP. 
C)  tax revenue and potential GDP. 
D)  tax rates and tax revenue. 
A)  government purchases and potential GDP. 
B)  tax rates and potential GDP. 
C)  tax revenue and potential GDP. 
D)  tax rates and tax revenue.

-In the above figure,if actual GDP = $15 trillion,there is a budget equal to .

Taxes and government expenditures that,without need for additional government action,change in response to changes in the level of economic activity are examples of

Between 2000 and 2005,Finland increased its tax on interest income. As a result,the supply curve for loanable funds shifted and the tax wedge .

An increase in the tax on interest income the supply of loanable funds and the equilibrium investment.

-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point

What is the largest source of revenue for the federal government?

If a tax cut increases people's labor supply,then

Automatic fiscal policy is at work if,as real GDP increases,________.

Suppose that real GDP equals potential GDP,but the government believes that the economy is in a below full-employment equilibrium.As a result,the government increases its expenditure on goods and services.In response to the government's fiscal policy,

The largest component of the fiscal imbalance is

Expenditures such as Social Security benefits,farm subsidies and grants are considered

The purpose of the Employment Act of 1946 was to

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

An increase in taxes on labor income decreases potential GDP.

The the interest rate,the the present value of a given future amount.

A budget surplus occurs when government

If the government's budget is in surplus even when the economy is at full employment,the surplus is said to be

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 2 by the government shown in the above table?

Comparing the U.S.budget position for 2012 to the rest of the world,we see that as a percentage of GDP,the ________ than in most other countries.

The Laffer curve is the relationship between

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 13: Fiscal Policy

-In the above figure,if actual GDP = $15 trillion,there is a budget ________ equal to ________.

Taxes and government expenditures that,without need for additional government action,change in response to changes in the level of economic activity are examples of

Between 2000 and 2005,Finland increased its tax on interest income. As a result,the supply curve for loanable funds shifted ________ and the tax wedge ________.

An increase in the tax on interest income ________ the supply of loanable funds and ________ the equilibrium investment.

-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point

What is the largest source of revenue for the federal government?

If a tax cut increases people's labor supply,then

Automatic fiscal policy is at work if,as real GDP increases,________.

Suppose that real GDP equals potential GDP,but the government believes that the economy is in a below full-employment equilibrium.As a result,the government increases its expenditure on goods and services.In response to the government's fiscal policy,

The largest component of the fiscal imbalance is

Expenditures such as Social Security benefits,farm subsidies and grants are considered

The purpose of the Employment Act of 1946 was to

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

An increase in taxes on labor income decreases potential GDP.

The ________ the interest rate,the ________ the present value of a given future amount.

A budget surplus occurs when government

If the government's budget is in surplus even when the economy is at full employment,the surplus is said to be

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 2 by the government shown in the above table?

Comparing the U.S.budget position for 2012 to the rest of the world,we see that as a percentage of GDP,the ________ than in most other countries.

The Laffer curve is the relationship between

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

-In the above figure,if actual GDP = $15 trillion,there is a budget equal to .

Between 2000 and 2005,Finland increased its tax on interest income. As a result,the supply curve for loanable funds shifted and the tax wedge .

An increase in the tax on interest income the supply of loanable funds and the equilibrium investment.

The the interest rate,the the present value of a given future amount.