Question 1

To eliminate the fiscal imbalance the government could

Accepted Answer

A)  lower benefits and lower tax revenues. 
B)  increase benefits and increase tax revenues. 
C)  lower benefits and increase tax revenues. 
D)  increase benefits and lower tax revenues. 
A)  lower benefits and lower tax revenues. 
B)  increase benefits and increase tax revenues. 
C)  lower benefits and increase tax revenues. 
D)  increase benefits and lower tax revenues.

Question 2

-In the above figure,if the economy initially is at point A and government expenditure increases,in the short run the economy will move to point

Accepted Answer

A)  B. 
B)  C. 
C)  A, that is, the equilibrium will NOT change. 
D)  None of the above answers is correct. 
A)  B. 
B)  C. 
C)  A, that is, the equilibrium will NOT change. 
D)  None of the above answers is correct.

Question 3

The structural deficit or surplus is the

Accepted Answer

A)  difference between actual government outlays and actual government receipts. 
B)  change in national debt that will result from current budgetary policies. 
C)  government budget deficit or surplus that would occur if the economy were at potential GDP. 
D)  actual government budget deficit or surplus minus expenditures for capital improvements. 
A)  difference between actual government outlays and actual government receipts. 
B)  change in national debt that will result from current budgetary policies. 
C)  government budget deficit or surplus that would occur if the economy were at potential GDP. 
D)  actual government budget deficit or surplus minus expenditures for capital improvements.

Question 4

Which of the following are a limitation of fiscal policy?
I. There is a lag between recognizing that fiscal policy might be needed and when it actually takes effect.
II. Economic forecasts might be incorrect.
III. Monetary policy might counter fiscal policy.

Accepted Answer

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

Question 5

Using fiscal policy,to increase real GDP and employment the government could ________ government expenditure on goods and services or ________ taxes.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 6

Suppose a country has been running a persistent government budget deficit.If the deficit is reduced,but remains positive,

Accepted Answer

A)  government debt will increase. 
B)  government debt will decrease. 
C)  the country will experience a budget surplus. 
D)  interest payments on the debt immediately will decrease. 
A)  government debt will increase. 
B)  government debt will decrease. 
C)  the country will experience a budget surplus. 
D)  interest payments on the debt immediately will decrease.

Question 7

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

Accepted Answer

A)  only part of the increase in disposable income from the tax cut is spent. 
B)  the amount by which taxes change is affected by the MPC. 
C)  changes in government expenditure do not directly affect consumption. 
D)  tax rates are the same regardless of income levels. 
A)  only part of the increase in disposable income from the tax cut is spent. 
B)  the amount by which taxes change is affected by the MPC. 
C)  changes in government expenditure do not directly affect consumption. 
D)  tax rates are the same regardless of income levels.

Question 8

The government begins year 1 with $25 billion of debt.Based on the information in the above table,what is the amount of debt following year 5?

Accepted Answer

A)  -$20 billion (The government has net saving rather than debt.) 
B)  $35 billion 
C)  $50 billion 
D)  $325 billion 
A)  -$20 billion (The government has net saving rather than debt.) 
B)  $35 billion 
C)  $50 billion 
D)  $325 billion

Question 9

In January 2013 the Chinese government held approximately $1 trillion U.S.government debt.The Chinese government accumulated such a large amount of U.S.government debt because for the past decade the United States

Accepted Answer

A)  government made substantial foreign aid available to the Chinese government. 
B)  has grown more rapidly than has the Chinese economy. 
C)  has exported more to China than it has imported from China. 
D)  has imported more from China than it has exported to China. 
A)  government made substantial foreign aid available to the Chinese government. 
B)  has grown more rapidly than has the Chinese economy. 
C)  has exported more to China than it has imported from China. 
D)  has imported more from China than it has exported to China.

Question 10

An increase in taxes on labor income shifts the labor supply curve ________ and the ________.

Accepted Answer

A)  leftward; after-tax wage rate falls 
B)  rightward; before-tax wage rate rises 
C)  leftward; after-tax wage rate rises 
D)  rightward; before-tax wage rate falls 
A)  leftward; after-tax wage rate falls 
B)  rightward; before-tax wage rate rises 
C)  leftward; after-tax wage rate rises 
D)  rightward; before-tax wage rate falls

Question 11

If the federal government's tax revenues are greater than its outlays,then the federal budget has a

Accepted Answer

A)  deficit. 
B)  surplus. 
C)  transfer payment. 
D)  balanced budget. 
A)  deficit. 
B)  surplus. 
C)  transfer payment. 
D)  balanced budget.

Question 12

The use of discretionary fiscal policy to end a recession is limited because

Accepted Answer

A)  the legislative process is slow. 
B)  potential GDP changes too rapidly. 
C)  the real-world multiplier is too small to have an impact on real GDP. 
D)  in the real world, taxes are not induced. 
A)  the legislative process is slow. 
B)  potential GDP changes too rapidly. 
C)  the real-world multiplier is too small to have an impact on real GDP. 
D)  in the real world, taxes are not induced.

Question 13

What is the difference between discretionary fiscal policy and automatic fiscal policy?

Accepted Answer

Discretionary fiscal policy is a policy

Question 14

An increase in the income tax rate ________ employment and ________ potential GDP.

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 15

In 2007,Germany increased the value added tax (VAT) on consumption from 16 percent to 19 percent. The supply-side view,this will ________.

Accepted Answer

A)  increase the tax wedge and lower the incentive to work. 
B)  decrease the tax wedge and lower the incentive to work. 
C)  shift the labor supply curve to the right. 
D)  increase the incentive to work in order to pay the higher tax. 
A)  increase the tax wedge and lower the incentive to work. 
B)  decrease the tax wedge and lower the incentive to work. 
C)  shift the labor supply curve to the right. 
D)  increase the incentive to work in order to pay the higher tax.

Question 16

If tax receipts exactly equaled government outlays in a year,the federal government debt would be zero.

Accepted Answer

A) True 
 B)False

Question 17

The Employment Act of 1946 made it the responsibility of the federal government to

Accepted Answer

A)  balance its budget because that policy would create the maximum level of employment. 
B)  promote maximum employment. 
C)  provide full employment and a stable balance of payments. 
D)  improve the distribution of income. 
A)  balance its budget because that policy would create the maximum level of employment. 
B)  promote maximum employment. 
C)  provide full employment and a stable balance of payments. 
D)  improve the distribution of income.

Question 18

$$\begin{array} { | l | c | } 
\hline \text { Component } & \begin{array} { c } 
\text { Dollars } \
\text { (billion) }
\end{array} \
\hline \text { Personal income taxes } & 500 \
\hline \text { Social security taxes } & 400 \
\hline \text { Corporate income taxes } & 150 \
\hline \text { Indirect taxes } & 75 \
\hline \text { Transfer payments } & 1,200 \
\hline \text { Expenditure on goods and } & \
 \text { services } & 225 \
\hline \text { Debt interest } & 75 \
\hline
\end{array}$$
-The table above has data for a country's government budget.The data show the government is running a ________ billion.

Accepted Answer

A)  budget surplus of $300 
B)  budget deficit of $375 
C)  budget deficit of $550 
D)  budget surplus of $650 
A)  budget surplus of $300 
B)  budget deficit of $375 
C)  budget deficit of $550 
D)  budget surplus of $650

Question 19

Unemployment insurance are payments made to unemployed workers.Typically workers are paid for no more than 26 weeks.In December 2012,the federal government passed legislation that would extend the payments to a maximum of 73 weeks.This extension is an example of

Accepted Answer

A)  automatic fiscal policy. 
B)  discretionary fiscal policy. 
C)  non-needs spending. 
D)  contractionary fiscal policy. 
A)  automatic fiscal policy. 
B)  discretionary fiscal policy. 
C)  non-needs spending. 
D)  contractionary fiscal policy.

Question 20

The federal government debt is equal to the

Accepted Answer

A)  obligations of benefits from federal taxes and expenditures. 
B)  sum of all annual federal government outlays. 
C)  sum of past budget deficits minus the sum of past budget surpluses. 
D)  annual difference between federal government tax revenues and outlays. 
A)  obligations of benefits from federal taxes and expenditures. 
B)  sum of all annual federal government outlays. 
C)  sum of past budget deficits minus the sum of past budget surpluses. 
D)  annual difference between federal government tax revenues and outlays.

To eliminate the fiscal imbalance the government could

-In the above figure,if the economy initially is at point A and government expenditure increases,in the short run the economy will move to point

The structural deficit or surplus is the

Which of the following are a limitation of fiscal policy? I. There is a lag between recognizing that fiscal policy might be needed and when it actually takes effect. II. Economic forecasts might be incorrect. III. Monetary policy might counter fiscal policy.

Using fiscal policy,to increase real GDP and employment the government could government expenditure on goods and services or taxes.

Suppose a country has been running a persistent government budget deficit.If the deficit is reduced,but remains positive,

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

The government begins year 1 with $25 billion of debt.Based on the information in the above table,what is the amount of debt following year 5?

In January 2013 the Chinese government held approximately $1 trillion U.S.government debt.The Chinese government accumulated such a large amount of U.S.government debt because for the past decade the United States

An increase in taxes on labor income shifts the labor supply curve and the .

If the federal government's tax revenues are greater than its outlays,then the federal budget has a

The use of discretionary fiscal policy to end a recession is limited because

What is the difference between discretionary fiscal policy and automatic fiscal policy?

An increase in the income tax rate employment and potential GDP.

In 2007,Germany increased the value added tax (VAT) on consumption from 16 percent to 19 percent. The supply-side view,this will ________.

If tax receipts exactly equaled government outlays in a year,the federal government debt would be zero.

The Employment Act of 1946 made it the responsibility of the federal government to

Unemployment insurance are payments made to unemployed workers.Typically workers are paid for no more than 26 weeks.In December 2012,the federal government passed legislation that would extend the payments to a maximum of 73 weeks.This extension is an example of

The federal government debt is equal to the

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

To eliminate the fiscal imbalance the government could

-In the above figure,if the economy initially is at point A and government expenditure increases,in the short run the economy will move to point

The structural deficit or surplus is the

Which of the following are a limitation of fiscal policy? I. There is a lag between recognizing that fiscal policy might be needed and when it actually takes effect. II. Economic forecasts might be incorrect. III. Monetary policy might counter fiscal policy.

Using fiscal policy,to increase real GDP and employment the government could ________ government expenditure on goods and services or ________ taxes.

Suppose a country has been running a persistent government budget deficit.If the deficit is reduced,but remains positive,

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

The government begins year 1 with $25 billion of debt.Based on the information in the above table,what is the amount of debt following year 5?

In January 2013 the Chinese government held approximately $1 trillion U.S.government debt.The Chinese government accumulated such a large amount of U.S.government debt because for the past decade the United States

An increase in taxes on labor income shifts the labor supply curve ________ and the ________.

If the federal government's tax revenues are greater than its outlays,then the federal budget has a

The use of discretionary fiscal policy to end a recession is limited because

What is the difference between discretionary fiscal policy and automatic fiscal policy?

An increase in the income tax rate ________ employment and ________ potential GDP.

In 2007,Germany increased the value added tax (VAT) on consumption from 16 percent to 19 percent. The supply-side view,this will ________.

If tax receipts exactly equaled government outlays in a year,the federal government debt would be zero.

The Employment Act of 1946 made it the responsibility of the federal government to

Unemployment insurance are payments made to unemployed workers.Typically workers are paid for no more than 26 weeks.In December 2012,the federal government passed legislation that would extend the payments to a maximum of 73 weeks.This extension is an example of

The federal government debt is equal to the

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

Using fiscal policy,to increase real GDP and employment the government could government expenditure on goods and services or taxes.

An increase in taxes on labor income shifts the labor supply curve and the .

An increase in the income tax rate employment and potential GDP.