Question 1

Which of the following is NOT a revenue source for the Federal government?

Accepted Answer

A)  personal income taxes 
B)  indirect taxes 
C)  interest on corporate bond holdings 
D)  social security taxes 
A)  personal income taxes 
B)  indirect taxes 
C)  interest on corporate bond holdings 
D)  social security taxes

Question 2

The cyclical deficit is the portion of the deficit

Accepted Answer

A)  created by fluctuations in real GDP. 
B)  that is the result of nondiscretionary federal spending. 
C)  that would exist if the economy were at potential real GDP. 
D)  the result of discretionary federal spending. 
A)  created by fluctuations in real GDP. 
B)  that is the result of nondiscretionary federal spending. 
C)  that would exist if the economy were at potential real GDP. 
D)  the result of discretionary federal spending.

Question 3

-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 above 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 4

Fiscal policy

Accepted Answer

A)  is enacted by the Federal Reserve. 
B)  involves changing interest rates. 
C)  involves changing taxes and government spending. 
D)  involves changing the money supply. 
A)  is enacted by the Federal Reserve. 
B)  involves changing interest rates. 
C)  involves changing taxes and government spending. 
D)  involves changing the money supply.

Question 5

A decrease in the income tax rate

Accepted Answer

A)  decreases potential GDP. 
B)  increases the supply of labor. 
C)  increases the tax wedge. 
D)  decreases the demand for labor. 
A)  decreases potential GDP. 
B)  increases the supply of labor. 
C)  increases the tax wedge. 
D)  decreases the demand for labor.

Question 6

In the short run,an increase in government expenditure will I. shift the aggregate demand curve rightward.
II) increase real GDP.
III) increase the government expenditure multiplier.
IV) increase the tax multiplier.

Accepted Answer

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

Question 7

The Employment Act of 1946 states that it is the responsibility of the federal government to

Accepted Answer

A)  promote full employment. 
B)  promote economic equality. 
C)  maintain the inflation rate at below 10 percent per year. 
D)  All of the above answers are correct. 
A)  promote full employment. 
B)  promote economic equality. 
C)  maintain the inflation rate at below 10 percent per year. 
D)  All of the above answers are correct.

Question 8

The use of fiscal policy is limited because

Accepted Answer

A)  there is never a long enough time lag. 
B)  the economy is almost always at full employment. 
C)  the President may have different goals than Congress. 
D)  time lags associated with fiscal policy may cause the policy to take effect too late to solve the problem it was supposed to address. 
A)  there is never a long enough time lag. 
B)  the economy is almost always at full employment. 
C)  the President may have different goals than Congress. 
D)  time lags associated with fiscal policy may cause the policy to take effect too late to solve the problem it was supposed to address.

Question 9

"More than 9,000 laid-off Nevada workers will qualify for a second 13-week round of extended unemployment benefits,under federal legislation signed by President Bush. [The] workers exhausted their first 13 weeks of extended benefits and will now be eligible for the new benefits,which pay an average of $293 a week." www.mercurynews.com 11/24/2008
Unemployment benefits are considered part of ________ fiscal policy. The extension of benefits would ________ fiscal policy.

Accepted Answer

A)  automatic; be discretionary 
B)  discretionary; be automatic 
C)  automatic; also be considered automatic 
D)  discretionary; also be considered discretionary 
A)  automatic; be discretionary 
B)  discretionary; be automatic 
C)  automatic; also be considered automatic 
D)  discretionary; also be considered discretionary

Question 10

In 2013,the U.S.government budget had a deficit.By definition,then,

Accepted Answer

A)  tax revenues were less than government outlays. 
B)  tax revenues were equal to government outlays. 
C)  tax revenues were greater than government outlays. 
D)  the government debt became negative. 
A)  tax revenues were less than government outlays. 
B)  tax revenues were equal to government outlays. 
C)  tax revenues were greater than government outlays. 
D)  the government debt became negative.

Question 11

How does a tax on labor income affect potential GDP?

Accepted Answer

The income tax reduces the incentive to

Question 12

The actual budget deficit is equal to the

Accepted Answer

A)  structural deficit. 
B)  cyclical deficit. 
C)  structural deficit minus the cyclical deficit. 
D)  structural deficit plus the cyclical deficit. 
A)  structural deficit. 
B)  cyclical deficit. 
C)  structural deficit minus the cyclical deficit. 
D)  structural deficit plus the cyclical deficit.

Question 13

In January 2013 the Social Security payroll tax increased by 2 percentage points.This increase ________ the U.S tax wedge.

Accepted Answer

A)  decreased 
B)  did not change 
C)  increased 
D)  More information about the total amount of the tax is needed to determine the impact on the tax wedge. 
A)  decreased 
B)  did not change 
C)  increased 
D)  More information about the total amount of the tax is needed to determine the impact on the tax wedge.

Question 14

-In the above figure,if the economy is initially at point B and government expenditure decreases,the economy will

Accepted Answer

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

Question 15

-The figure above illustrates the aggregate demand,short-run aggregate supply,and long-run aggregate supply in Lotus Land.The economy is currently at point D and the government increases its expenditure on goods and services.The economy will move to ________.The price level will ________,and the change in real GDP will be ________ the increase in aggregate demand.

Accepted Answer

A)  point A; fall; less than 
B)  point D; rise; less than 
C)  point C; rise; less than 
D)  point B; remain constant; the same as 
A)  point A; fall; less than 
B)  point D; rise; less than 
C)  point C; rise; less than 
D)  point B; remain constant; the same as

Question 16

Personal income taxes are the largest source of revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 17

If employment is less than full employment,what fiscal policy should the government pursue?

Accepted Answer

To restore full employment,the

Question 18

The magnitude of the tax multiplier ________ the magnitude of the government expenditure multiplier.

Accepted Answer

A)  is smaller than 
B)  is larger than 
C)  is equal to 
D)  is not comparable to 
A)  is smaller than 
B)  is larger than 
C)  is equal to 
D)  is not comparable to

Question 19

In 2013,the federal government of Happy Isle had tax revenues of $1 million,and spent $500,000 on transfer payments,$250,000 on goods and services and $300,000 on debt interest.In 2011,the government of Happy Isle had a ________.

Accepted Answer

A)  balanced budget 
B)  budget deficit of $50,000 
C)  budget surplus of $50,000 
D)  budget deficit of $1,050,000 
A)  balanced budget 
B)  budget deficit of $50,000 
C)  budget surplus of $50,000 
D)  budget deficit of $1,050,000

Question 20

The Laffer curve shows that increasing ________ increases ________ when ________ low.

Accepted Answer

A)  tax revenue; potential GDP; tax revenue is 
B)  tax rates; tax revenue; tax rates are 
C)  potential GDP; tax revenue; tax revenue is 
D)  None of the above answers is correct. 
A)  tax revenue; potential GDP; tax revenue is 
B)  tax rates; tax revenue; tax rates are 
C)  potential GDP; tax revenue; tax revenue is 
D)  None of the above answers is correct.

Which of the following is NOT a revenue source for the Federal government?

The cyclical deficit is the portion of the deficit

-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 above full employment,the government has a

Fiscal policy

A decrease in the income tax rate

In the short run,an increase in government expenditure will I. shift the aggregate demand curve rightward. II) increase real GDP. III) increase the government expenditure multiplier. IV) increase the tax multiplier.

The Employment Act of 1946 states that it is the responsibility of the federal government to

The use of fiscal policy is limited because

In 2013,the U.S.government budget had a deficit.By definition,then,

How does a tax on labor income affect potential GDP?

The actual budget deficit is equal to the

In January 2013 the Social Security payroll tax increased by 2 percentage points.This increase ________ the U.S tax wedge.

-In the above figure,if the economy is initially at point B and government expenditure decreases,the economy will

Personal income taxes are the largest source of revenue for the federal government.

If employment is less than full employment,what fiscal policy should the government pursue?

The magnitude of the tax multiplier ________ the magnitude of the government expenditure multiplier.

In 2013,the federal government of Happy Isle had tax revenues of $1 million,and spent $500,000 on transfer payments,$250,000 on goods and services and $300,000 on debt interest.In 2011,the government of Happy Isle had a ________.

The Laffer curve shows that increasing increases when low.

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

Which of the following is NOT a revenue source for the Federal government?

The cyclical deficit is the portion of the deficit

-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 above full employment,the government has a

Fiscal policy

A decrease in the income tax rate

In the short run,an increase in government expenditure will I. shift the aggregate demand curve rightward. II) increase real GDP. III) increase the government expenditure multiplier. IV) increase the tax multiplier.

The Employment Act of 1946 states that it is the responsibility of the federal government to

The use of fiscal policy is limited because

In 2013,the U.S.government budget had a deficit.By definition,then,

How does a tax on labor income affect potential GDP?

The actual budget deficit is equal to the

In January 2013 the Social Security payroll tax increased by 2 percentage points.This increase ________ the U.S tax wedge.

-In the above figure,if the economy is initially at point B and government expenditure decreases,the economy will

Personal income taxes are the largest source of revenue for the federal government.

If employment is less than full employment,what fiscal policy should the government pursue?

The magnitude of the tax multiplier ________ the magnitude of the government expenditure multiplier.

In 2013,the federal government of Happy Isle had tax revenues of $1 million,and spent $500,000 on transfer payments,$250,000 on goods and services and $300,000 on debt interest.In 2011,the government of Happy Isle had a ________.

The Laffer curve shows that increasing ________ increases ________ when ________ low.

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

The Laffer curve shows that increasing increases when low.