Question 1

The budget deficit

Accepted Answer

A)  is the total outstanding borrowing by the government. 
B)  is the difference between government outlays and tax revenues. 
C)  decreased during the Obama Administration. 
D)  reached its peak in the year 2000. 
A)  is the total outstanding borrowing by the government. 
B)  is the difference between government outlays and tax revenues. 
C)  decreased during the Obama Administration. 
D)  reached its peak in the year 2000.

Question 2

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

Accepted Answer

Both an increase in government

Question 3

In October 2008,President Bush enacted the Alternative Minimum Tax Relief Act of 2008,which resulted in lower taxes on labor income. According the supply-side view,as a result of this act the incentive to work ________ and the tax wedge ________.

Accepted Answer

A)  decreases; increases 
B)  increases; does not change 
C)  increases; decreases 
D)  increases; increases 
A)  decreases; increases 
B)  increases; does not change 
C)  increases; decreases 
D)  increases; increases

Question 4

One characteristic of automatic fiscal policy is that it

Accepted Answer

A)  requires no legislative action by Congress to be made effective. 
B)  automatically produces surpluses during recessions and deficits during inflation. 
C)  has no effect on unemployment. 
D)  reduces the size of the federal government debt during times of recession. 
A)  requires no legislative action by Congress to be made effective. 
B)  automatically produces surpluses during recessions and deficits during inflation. 
C)  has no effect on unemployment. 
D)  reduces the size of the federal government debt during times of recession.

Question 5

The main goal of fiscal policy is to produce a balanced budget.

Accepted Answer

A) True 
 B)False

Question 6

-In the above figure,which of the following policies could move the economy to potential GDP?

Accepted Answer

A)  decreasing government expenditures and increasing taxes 
B)  decreasing taxes and not changing government expenditures 
C)  increasing government expenditures and decreasing taxes 
D)  None of the above answers is correct. 
A)  decreasing government expenditures and increasing taxes 
B)  decreasing taxes and not changing government expenditures 
C)  increasing government expenditures and decreasing taxes 
D)  None of the above answers is correct.

Question 7

The government receives tax revenues from several sources.Rank the following sources from largest to the smallest. I. corporate income taxes
II) personal income taxes
III) Social Security taxes

Accepted Answer

A)  I, II, III 
B)  II, III, I 
C)  I, III, II 
D)  III, II, I 
A)  I, II, III 
B)  II, III, I 
C)  I, III, II 
D)  III, II, I

Question 8

-Economic data for a mythical economy in the years 2006-2010 are summarized in the figure above.Assume that the spending formulas and tax schedules are identical for all years.When the economy is at less than full employment,the government has a

Accepted Answer

A)  budget surplus. 
B)  balanced budget. 
C)  budget deficit. 
D)  procyclical policy. 
A)  budget surplus. 
B)  balanced budget. 
C)  budget deficit. 
D)  procyclical policy.

Question 9

Changes in which of the following is included as part of fiscal policy?

Accepted Answer

A)  the quantity of money 
B)  the level of interest rates 
C)  monetary policy 
D)  tax rates 
A)  the quantity of money 
B)  the level of interest rates 
C)  monetary policy 
D)  tax rates

Question 10

An increase in government expenditure shifts the AD curve ________ and an increase in taxes shifts the AD curve ________.

Accepted Answer

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

Question 11

All of the following are government outlays EXCEPT

Accepted Answer

A)  interest on the government's debt. 
B)  transfer payments. 
C)  purchases of corporate bonds. 
D)  expenditure on goods and services. 
A)  interest on the government's debt. 
B)  transfer payments. 
C)  purchases of corporate bonds. 
D)  expenditure on goods and services.

Question 12

An example of a discretionary fiscal policy is when

Accepted Answer

A)  tax receipts fall as incomes fall. 
B)  unemployment compensation payments rise with unemployment rates. 
C)  food stamp payments rise when the economy is in a recession. 
D)  Congress passes a law that raises personal marginal tax rates. 
A)  tax receipts fall as incomes fall. 
B)  unemployment compensation payments rise with unemployment rates. 
C)  food stamp payments rise when the economy is in a recession. 
D)  Congress passes a law that raises personal marginal tax rates.

Question 13

The government's budget deficit or surplus equals the

Accepted Answer

A)  change in outlays divided by change in revenue. 
B)  average outlay divided by average revenue. 
C)  change in revenue minus change in outlays. 
D)  total tax revenue minus total government outlays. 
A)  change in outlays divided by change in revenue. 
B)  average outlay divided by average revenue. 
C)  change in revenue minus change in outlays. 
D)  total tax revenue minus total government outlays.

Question 14

If real GDP is less than potential GDP,which of the following fiscal policies would increase real GDP?

Accepted Answer

A)  only a decrease government expenditure 
B)  only an increase taxes 
C)  increase government expenditure and/or decrease taxes 
D)  decrease government expenditure and/or increase taxes 
A)  only a decrease government expenditure 
B)  only an increase taxes 
C)  increase government expenditure and/or decrease taxes 
D)  decrease government expenditure and/or increase taxes

Question 15

If the government has a balanced budget,the total amount of government debt is

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero. 
A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero.

Question 16

Prior to the Great Depression,the purpose of the federal budget was to ________.

Accepted Answer

A)  stabilize the economy 
B)  finance the activities of the government 
C)  maintain low interest rates 
D)  decrease unemployment 
A)  stabilize the economy 
B)  finance the activities of the government 
C)  maintain low interest rates 
D)  decrease unemployment

Question 17

A country reports that its government outlays total $1.8 trillion and its receipts total $1.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

Accepted Answer

The country has a bu

Question 18

According to the Laffer curve,raising the tax rate

Accepted Answer

A)  always increases the amount of tax revenue. 
B)  always decreases the amount of tax revenue. 
C)  does not change the amount of tax revenue. 
D)  might increase, decrease, or not change the amount of tax revenue. 
A)  always increases the amount of tax revenue. 
B)  always decreases the amount of tax revenue. 
C)  does not change the amount of tax revenue. 
D)  might increase, decrease, or not change the amount of tax revenue.

Question 19

A fiscal stimulus is used to increase production and employment.

Accepted Answer

A) True 
 B)False

Question 20

The structural surplus measures whether a budget surplus is cyclical or structural.

Accepted Answer

A) True 
 B)False

The budget deficit

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

In October 2008,President Bush enacted the Alternative Minimum Tax Relief Act of 2008,which resulted in lower taxes on labor income. According the supply-side view,as a result of this act the incentive to work and the tax wedge .

One characteristic of automatic fiscal policy is that it

The main goal of fiscal policy is to produce a balanced budget.

-In the above figure,which of the following policies could move the economy to potential GDP?

The government receives tax revenues from several sources.Rank the following sources from largest to the smallest. I. corporate income taxes II) personal income taxes III) Social Security taxes

-Economic data for a mythical economy in the years 2006-2010 are summarized in the figure above.Assume that the spending formulas and tax schedules are identical for all years.When the economy is at less than full employment,the government has a

Changes in which of the following is included as part of fiscal policy?

An increase in government expenditure shifts the AD curve and an increase in taxes shifts the AD curve .

All of the following are government outlays EXCEPT

An example of a discretionary fiscal policy is when

The government's budget deficit or surplus equals the

If real GDP is less than potential GDP,which of the following fiscal policies would increase real GDP?

If the government has a balanced budget,the total amount of government debt is

Prior to the Great Depression,the purpose of the federal budget was to ________.

A country reports that its government outlays total $1.8 trillion and its receipts total $1.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

According to the Laffer curve,raising the tax rate

A fiscal stimulus is used to increase production and employment.

The structural surplus measures whether a budget surplus is cyclical or structural.

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

The budget deficit

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

In October 2008,President Bush enacted the Alternative Minimum Tax Relief Act of 2008,which resulted in lower taxes on labor income. According the supply-side view,as a result of this act the incentive to work ________ and the tax wedge ________.

One characteristic of automatic fiscal policy is that it

The main goal of fiscal policy is to produce a balanced budget.

-In the above figure,which of the following policies could move the economy to potential GDP?

The government receives tax revenues from several sources.Rank the following sources from largest to the smallest. I. corporate income taxes II) personal income taxes III) Social Security taxes

-Economic data for a mythical economy in the years 2006-2010 are summarized in the figure above.Assume that the spending formulas and tax schedules are identical for all years.When the economy is at less than full employment,the government has a

Changes in which of the following is included as part of fiscal policy?

An increase in government expenditure shifts the AD curve ________ and an increase in taxes shifts the AD curve ________.

All of the following are government outlays EXCEPT

An example of a discretionary fiscal policy is when

The government's budget deficit or surplus equals the

If real GDP is less than potential GDP,which of the following fiscal policies would increase real GDP?

If the government has a balanced budget,the total amount of government debt is

Prior to the Great Depression,the purpose of the federal budget was to ________.

A country reports that its government outlays total $1.8 trillion and its receipts total $1.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

According to the Laffer curve,raising the tax rate

A fiscal stimulus is used to increase production and employment.

The structural surplus measures whether a budget surplus is cyclical or structural.

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 October 2008,President Bush enacted the Alternative Minimum Tax Relief Act of 2008,which resulted in lower taxes on labor income. According the supply-side view,as a result of this act the incentive to work and the tax wedge .

An increase in government expenditure shifts the AD curve and an increase in taxes shifts the AD curve .