Question 1

The U.S. government's budget

Accepted Answer

A)  must be balanced each year. 
B)  has mostly been in surplus during the past 30 years. 
C)  has mostly been in deficit during the past 30 years. 
D)  has always been in deficit during the past 30 years. 
A)  must be balanced each year. 
B)  has mostly been in surplus during the past 30 years. 
C)  has mostly been in deficit during the past 30 years. 
D)  has always been in deficit during the past 30 years.

Question 2

Suppose that the government increases taxes. One effect of this change is that it decreases

Accepted Answer

A)  disposable income, which decreases consumption expenditure and aggregate demand. 
B)  government expenditure, which decreases aggregate demand. 
C)  the size of the government expenditure multiplier. 
D)  disposable income which then decreases aggregate supply. 
A)  disposable income, which decreases consumption expenditure and aggregate demand. 
B)  government expenditure, which decreases aggregate demand. 
C)  the size of the government expenditure multiplier. 
D)  disposable income which then decreases aggregate supply.

Question 3

The Council of Economic Advisors advises the

Accepted Answer

A)  President. 
B)  Congress. 
C)  Senate. 
D)  House of Representatives. 
A)  President. 
B)  Congress. 
C)  Senate. 
D)  House of Representatives.

Question 4

-The table above has data for a country's government budget. Government outlays for the economy equal ________ billion.

Accepted Answer

A)  $1200 
B)  $1275 
C)  $1500 
D)  $1425 
A)  $1200 
B)  $1275 
C)  $1500 
D)  $1425

Question 5

If the tax revenue equal $1.5 billion and government outlays equal $1.6 billion, then the

Accepted Answer

A)  government budget has a deficit of $0.1 billion. 
B)  government budget has a surplus of $0.1 billion. 
C)  government debt is equal to $0.1 billion. 
D)  government debt declines by $0.1 billion. 
A)  government budget has a deficit of $0.1 billion. 
B)  government budget has a surplus of $0.1 billion. 
C)  government debt is equal to $0.1 billion. 
D)  government debt declines by $0.1 billion.

Question 6

The largest source of revenue for the federal government is ________ and the largest outlay is for ________.

Accepted Answer

A)  corporate taxes; Social Security 
B)  personal income taxes; Medicare 
C)  personal income taxes; interest on national debt 
D)  personal income taxes; transfer payments 
A)  corporate taxes; Social Security 
B)  personal income taxes; Medicare 
C)  personal income taxes; interest on national debt 
D)  personal income taxes; transfer payments

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

-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 9

An increase in government expenditure leads to rightward shift of the AD curve.

Accepted Answer

A) True 
 B)False

Question 10

Government expenditure on goods and services is the largest component of total federal government expenditures.

Accepted Answer

A) True 
 B)False

Question 11

In response to the economic crisis in 2008, President Merkel "highlighted in her speech what the German government has already done: a financial sector rescue package worth up to €500 billion, and a proposed stimulus package of tax breaks [on income] and spending measures aimed at triggering investments of up to €50 billion over the next two years."
Www)iht.com, 11/26/2008
Which parts of the stimulus plan will increase labor supply?

Accepted Answer

A)  financial sector rescue package 
B)  spending measures targeted at investment 
C)  tax breaks 
D)  all of the above 
A)  financial sector rescue package 
B)  spending measures targeted at investment 
C)  tax breaks 
D)  all of the above

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

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 14

Splitting the fiscal imbalance between the current generation and future generations is called

Accepted Answer

A)  genealogical accounting. 
B)  actuarial accounting. 
C)  generational imbalance. 
D)  actuarial balance. 
A)  genealogical accounting. 
B)  actuarial accounting. 
C)  generational imbalance. 
D)  actuarial balance.

Question 15

The largest item of government outlays is ________.

Accepted Answer

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

Question 16

Social Security benefits and expenditures on Medicare and Medicaid are classified as

Accepted Answer

A)  debt interest. 
B)  purchases of goods and services. 
C)  production of goods and services. 
D)  transfer payments. 
A)  debt interest. 
B)  purchases of goods and services. 
C)  production of goods and services. 
D)  transfer payments.

Question 17

Income taxes in the United States are part of automatic fiscal policy because

Accepted Answer

A)  tax revenues increase when income increases, thus offsetting some of the increase in aggregate demand. 
B)  tax revenues decrease when income increases, intensifying the increase in aggregate demand. 
C)  the President can increase tax rates whenever the President deems such a policy appropriate. 
D)  tax rates can be adjusted by the Congress to counteract economic fluctuations. 
A)  tax revenues increase when income increases, thus offsetting some of the increase in aggregate demand. 
B)  tax revenues decrease when income increases, intensifying the increase in aggregate demand. 
C)  the President can increase tax rates whenever the President deems such a policy appropriate. 
D)  tax rates can be adjusted by the Congress to counteract economic fluctuations.

Question 18

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 19

The gross public debt was approximately $6 trillion in 2002 and approximately $16 trillion in 2012. These numbers definitely indicate that in the 10 years between 2002 and 2012

Accepted Answer

A)  the government had budget deficits that totaled about $10 trillion. 
B)  the government had budget deficits of about $10 trillion per year. 
C)  government outlays increased by about $1 trillion per year. 
D)  government receipts decreased by about $1 trillion per year. 
A)  the government had budget deficits that totaled about $10 trillion. 
B)  the government had budget deficits of about $10 trillion per year. 
C)  government outlays increased by about $1 trillion per year. 
D)  government receipts decreased by about $1 trillion per year.

Question 20

The structural surplus

Accepted Answer

A)  equals the actual surplus plus the cyclical surplus. 
B)  is the government budget surplus that would exist if the economy was at potential GDP. 
C)  is, by definition, equal to the negative of the cyclical deficit. 
D)  is legally required to be positive. 
A)  equals the actual surplus plus the cyclical surplus. 
B)  is the government budget surplus that would exist if the economy was at potential GDP. 
C)  is, by definition, equal to the negative of the cyclical deficit. 
D)  is legally required to be positive.

The U.S. government's budget

Suppose that the government increases taxes. One effect of this change is that it decreases

The Council of Economic Advisors advises the

-The table above has data for a country's government budget. Government outlays for the economy equal ________ billion.

If the tax revenue equal $1.5 billion and government outlays equal $1.6 billion, then the

The largest source of revenue for the federal government is and the largest outlay is for .

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

An increase in government expenditure leads to rightward shift of the AD curve.

Government expenditure on goods and services is the largest component of total federal government expenditures.

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

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

Splitting the fiscal imbalance between the current generation and future generations is called

The largest item of government outlays is ________.

Social Security benefits and expenditures on Medicare and Medicaid are classified as

Income taxes in the United States are part of automatic fiscal policy because

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

The gross public debt was approximately $6 trillion in 2002 and approximately $16 trillion in 2012. These numbers definitely indicate that in the 10 years between 2002 and 2012

The structural surplus

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

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

The U.S. government's budget

Suppose that the government increases taxes. One effect of this change is that it decreases

The Council of Economic Advisors advises the

-The table above has data for a country's government budget. Government outlays for the economy equal ________ billion.

If the tax revenue equal $1.5 billion and government outlays equal $1.6 billion, then the

The largest source of revenue for the federal government is ________ and the largest outlay is for ________.

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

An increase in government expenditure leads to rightward shift of the AD curve.

Government expenditure on goods and services is the largest component of total federal government expenditures.

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

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

Splitting the fiscal imbalance between the current generation and future generations is called

The largest item of government outlays is ________.

Social Security benefits and expenditures on Medicare and Medicaid are classified as

Income taxes in the United States are part of automatic fiscal policy because

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

The gross public debt was approximately $6 trillion in 2002 and approximately $16 trillion in 2012. These numbers definitely indicate that in the 10 years between 2002 and 2012

The structural surplus

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

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

The largest source of revenue for the federal government is and the largest outlay is for .