Question 1

By its very definition,every budget deficit is structural in nature.

Accepted Answer

A) True 
 B)False

Question 2

Federal government expenditures as a percentage of GDP are currently equal to approximately 10 percent.

Accepted Answer

A) True 
 B)False

Question 3

An increase in taxes on interest income ________ supply of loanable funds curve and ________ the demand for loanable funds curve.

Accepted Answer

A)  shifts; does not shift 
B)  does not shift; shifts 
C)  does not shift; does not shift 
D)  shifts; shifts 
A)  shifts; does not shift 
B)  does not shift; shifts 
C)  does not shift; does not shift 
D)  shifts; shifts

Question 4

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

Accepted Answer

A)  $0 
B)  $25 billion deficit 
C)  $25 billion surplus 
D)  $240 billion surplus 
A)  $0 
B)  $25 billion deficit 
C)  $25 billion surplus 
D)  $240 billion surplus

Question 5

Using the AD-AS model,an increase in government expenditure

Accepted Answer

A)  has no impact on real GDP. 
B)  has no impact on real GDP, but will increase potential GDP. 
C)  increases both real GDP and the price level. 
D)  has a full multiplier effect on real GDP, leaving the price level unchanged in the long run. 
A)  has no impact on real GDP. 
B)  has no impact on real GDP, but will increase potential GDP. 
C)  increases both real GDP and the price level. 
D)  has a full multiplier effect on real GDP, leaving the price level unchanged in the long run.

Question 6

At the start of 2013,the U.S.government predicted that economic growth would rise by 2016 and that the government's deficit would also increase.The government therefore was predicting that in 2016 the cyclical deficit would ________ and the structural deficit would ________.

Accepted Answer

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

Question 7

On January 1,2013 the income tax rate for single taxpayers making more than $400,000 per year increased from 35 percent to 39.6 percent.This tax increase ________ potential GDP.

Accepted Answer

A)  increases 
B)  does not change 
C)  decreases 
D)  None of the above answers are correct because the tax increase might increase, decrease, or not change potential GDP. 
A)  increases 
B)  does not change 
C)  decreases 
D)  None of the above answers are correct because the tax increase might increase, decrease, or not change potential GDP.

Question 8

Suppose the tax rate on interest income is 25 percent,the real interest rate is 4 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

Accepted Answer

A) .5 percent. 
B)  3.5 percent. 
C)  4.0 percent. 
D)  2.0 percent. 
A) .5 percent. 
B)  3.5 percent. 
C)  4.0 percent. 
D)  2.0 percent.

Question 9

A discretionary fiscal policy is a fiscal policy that

Accepted Answer

A)  involves a change in government defense spending. 
B)  is triggered by the state of the economy. 
C)  requires action by the Congress. 
D)  involves a change in corporate tax rates. 
A)  involves a change in government defense spending. 
B)  is triggered by the state of the economy. 
C)  requires action by the Congress. 
D)  involves a change in corporate tax rates.

Question 10

The supply side effects of a cut in tax rates include ________ in the supply of labor and ________ in the supply of loanable funds.

Accepted Answer

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

Question 11

If the government runs a deficit,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 12

During an expansion,tax revenues ________,while during a recession,tax revenues ________.

Accepted Answer

A)  decrease; increase 
B)  increase; decrease 
C)  remain stable; decrease 
D)  fail to cover expenditures; fail to match transfer payments 
A)  decrease; increase 
B)  increase; decrease 
C)  remain stable; decrease 
D)  fail to cover expenditures; fail to match transfer payments

Question 13

In January 2013 certain tax rates increased,which were predicted to increase the federal government's tax revenue.An increase in tax revenue ________ the government's budget deficit and over time thereby ________ the amount of government debt.

Accepted Answer

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

Question 14

When real GDP is less than potential GDP,an increase in government expenditures will ________ real GDP and ________ the price level.

Accepted Answer

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

Question 15

The use of the U.S.federal budget to help stabilize the economy grew in reaction to the ________ and is known as ________.

Accepted Answer

A)  stagflation of the 1970s; fiscal policy 
B)  Great Depression of the 1930s; fiscal policy 
C)  stagflation of the 1970s; government policy 
D)  Great Depression of the 1930s; monetary policy 
A)  stagflation of the 1970s; fiscal policy 
B)  Great Depression of the 1930s; fiscal policy 
C)  stagflation of the 1970s; government policy 
D)  Great Depression of the 1930s; monetary policy

Question 16

An increase in the government ________ reduces the government's ________.

Accepted Answer

A)  budget deficit; debt 
B)  budget surplus; debt 
C)  debt; budget deficit 
D)  None of the above answers is correct. 
A)  budget deficit; debt 
B)  budget surplus; debt 
C)  debt; budget deficit 
D)  None of the above answers is correct.

Question 17

The structural deficit is that deficit that would exist

Accepted Answer

A)  with the taxes and outlays that would occur if the economy was at the equilibrium level of real GDP. 
B)  with the taxes and outlays that would occur if the economy was at the full employment level of real GDP. 
C)  if tax rates were set to maximize tax revenues. 
D)  if there were no discretionary fiscal interventions into the economy. 
A)  with the taxes and outlays that would occur if the economy was at the equilibrium level of real GDP. 
B)  with the taxes and outlays that would occur if the economy was at the full employment level of real GDP. 
C)  if tax rates were set to maximize tax revenues. 
D)  if there were no discretionary fiscal interventions into the economy.

Question 18

Suppose the tax rate on interest income is 50 percent,the real interest rate is 3 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

Accepted Answer

A)  -0.5 percent. 
B)  3.5 percent. 
C)  3.0 percent. 
D)  4.0 percent. 
A)  -0.5 percent. 
B)  3.5 percent. 
C)  3.0 percent. 
D)  4.0 percent.

Question 19

If the government runs a surplus,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 20

The structural deficit is the deficit

Accepted Answer

A)  during a recession. 
B)  during an expansion. 
C)  that would occur at full employment. 
D)  caused by the business cycle. 
A)  during a recession. 
B)  during an expansion. 
C)  that would occur at full employment. 
D)  caused by the business cycle.

By its very definition,every budget deficit is structural in nature.

Federal government expenditures as a percentage of GDP are currently equal to approximately 10 percent.

An increase in taxes on interest income supply of loanable funds curve and the demand for loanable funds curve.

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 1 by the government shown in the above table?

Using the AD-AS model,an increase in government expenditure

At the start of 2013,the U.S.government predicted that economic growth would rise by 2016 and that the government's deficit would also increase.The government therefore was predicting that in 2016 the cyclical deficit would and the structural deficit would .

On January 1,2013 the income tax rate for single taxpayers making more than $400,000 per year increased from 35 percent to 39.6 percent.This tax increase ________ potential GDP.

Suppose the tax rate on interest income is 25 percent,the real interest rate is 4 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

A discretionary fiscal policy is a fiscal policy that

The supply side effects of a cut in tax rates include in the supply of labor and in the supply of loanable funds.

If the government runs a deficit,the total amount of government debt is

During an expansion,tax revenues ,while during a recession,tax revenues .

In January 2013 certain tax rates increased,which were predicted to increase the federal government's tax revenue.An increase in tax revenue the government's budget deficit and over time thereby the amount of government debt.

When real GDP is less than potential GDP,an increase in government expenditures will real GDP and the price level.

The use of the U.S.federal budget to help stabilize the economy grew in reaction to the and is known as .

An increase in the government reduces the government's .

The structural deficit is that deficit that would exist

Suppose the tax rate on interest income is 50 percent,the real interest rate is 3 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

If the government runs a surplus,the total amount of government debt is

The structural deficit is the deficit

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

By its very definition,every budget deficit is structural in nature.

Federal government expenditures as a percentage of GDP are currently equal to approximately 10 percent.

An increase in taxes on interest income ________ supply of loanable funds curve and ________ the demand for loanable funds curve.

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 1 by the government shown in the above table?

Using the AD-AS model,an increase in government expenditure

At the start of 2013,the U.S.government predicted that economic growth would rise by 2016 and that the government's deficit would also increase.The government therefore was predicting that in 2016 the cyclical deficit would ________ and the structural deficit would ________.

On January 1,2013 the income tax rate for single taxpayers making more than $400,000 per year increased from 35 percent to 39.6 percent.This tax increase ________ potential GDP.

Suppose the tax rate on interest income is 25 percent,the real interest rate is 4 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

A discretionary fiscal policy is a fiscal policy that

The supply side effects of a cut in tax rates include ________ in the supply of labor and ________ in the supply of loanable funds.

If the government runs a deficit,the total amount of government debt is

During an expansion,tax revenues ________,while during a recession,tax revenues ________.

In January 2013 certain tax rates increased,which were predicted to increase the federal government's tax revenue.An increase in tax revenue ________ the government's budget deficit and over time thereby ________ the amount of government debt.

When real GDP is less than potential GDP,an increase in government expenditures will ________ real GDP and ________ the price level.

The use of the U.S.federal budget to help stabilize the economy grew in reaction to the ________ and is known as ________.

An increase in the government ________ reduces the government's ________.

The structural deficit is that deficit that would exist

Suppose the tax rate on interest income is 50 percent,the real interest rate is 3 percent,and the inflation rate is 4 percent.In this case,the real after-tax interest rate is

If the government runs a surplus,the total amount of government debt is

The structural deficit is the deficit

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

An increase in taxes on interest income supply of loanable funds curve and the demand for loanable funds curve.

At the start of 2013,the U.S.government predicted that economic growth would rise by 2016 and that the government's deficit would also increase.The government therefore was predicting that in 2016 the cyclical deficit would and the structural deficit would .

The supply side effects of a cut in tax rates include in the supply of labor and in the supply of loanable funds.

During an expansion,tax revenues ,while during a recession,tax revenues .

In January 2013 certain tax rates increased,which were predicted to increase the federal government's tax revenue.An increase in tax revenue the government's budget deficit and over time thereby the amount of government debt.

When real GDP is less than potential GDP,an increase in government expenditures will real GDP and the price level.

The use of the U.S.federal budget to help stabilize the economy grew in reaction to the and is known as .

An increase in the government reduces the government's .