Question 1

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 2

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 3

The Laffer curve is the relationship between

Accepted Answer

A)  government purchases and potential GDP. 
B)  tax rates and potential GDP. 
C)  tax revenue and potential GDP. 
D)  tax rates and tax revenue. 
A)  government purchases and potential GDP. 
B)  tax rates and potential GDP. 
C)  tax revenue and potential GDP. 
D)  tax rates and tax revenue.

Question 4

In early 2013, economists predicted that the U.S. economy would grow more rapidly than had been predicted. If this prediction comes true, then the structural deficit will ________ than had been predicted.

Accepted Answer

A)  shrink more rapidly 
B)  shrink more slowly 
C)  increase more slowly 
D)  None of the above are correct because the growth of the economy does not affect the size of the structural deficit. 
A)  shrink more rapidly 
B)  shrink more slowly 
C)  increase more slowly 
D)  None of the above are correct because the growth of the economy does not affect the size of the structural deficit.

Question 5

What is needs-tested spending and how does it affect the government expenditure multiplier?

Accepted Answer

Needs-tested spending is government spen

Question 6

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

Accepted Answer

A)  the President and his cabinet 
B)  the Federal Reserve Board 
C)  the House of Representatives 
D)  the Senate 
A)  the President and his cabinet 
B)  the Federal Reserve Board 
C)  the House of Representatives 
D)  the Senate

Question 7

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 8

A government that currently has a budget deficit can balance its budget by ________.

Accepted Answer

A)  increasing tax revenues by more than it increases outlays 
B)  increasing both tax revenues and outlays by the same amount 
C)  decreasing tax revenues by more than it decreases outlays 
D)  decreasing tax revenues by more than it increases outlays 
A)  increasing tax revenues by more than it increases outlays 
B)  increasing both tax revenues and outlays by the same amount 
C)  decreasing tax revenues by more than it decreases outlays 
D)  decreasing tax revenues by more than it increases outlays

Question 9

A government incurs a budget deficit when

Accepted Answer

A)  taxes are greater than government outlays. 
B)  taxes are less than government outlays. 
C)  exports are greater than imports. 
D)  exports are less than imports. 
A)  taxes are greater than government outlays. 
B)  taxes are less than government outlays. 
C)  exports are greater than imports. 
D)  exports are less than imports.

Question 10

The difference between automatic fiscal policy and discretionary fiscal policy is that

Accepted Answer

A)  Congress initiates automatic fiscal policy. 
B)  the President has nothing to do with discretionary fiscal policy. 
C)  Congress must pass laws implementing discretionary fiscal policy. 
D)  the President initiates discretionary fiscal policy. 
A)  Congress initiates automatic fiscal policy. 
B)  the President has nothing to do with discretionary fiscal policy. 
C)  Congress must pass laws implementing discretionary fiscal policy. 
D)  the President initiates discretionary fiscal policy.

Question 11

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 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

If tax receipts are greater than government outlays the government has a budget surplus.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  the incentive to work increases. 
B)  the supply of labor increases. 
C)  there will be an increase in potential GDP due to the increase tax revenue. 
D)  the after-tax wage rate falls. 
A)  the incentive to work increases. 
B)  the supply of labor increases. 
C)  there will be an increase in potential GDP due to the increase tax revenue. 
D)  the after-tax wage rate falls.

Question 16

The difference between the before-tax and after-tax rates is referred to as the

Accepted Answer

A)  tax plug. 
B)  deadweight gain. 
C)  tax wedge. 
D)  taxation penalty. 
A)  tax plug. 
B)  deadweight gain. 
C)  tax wedge. 
D)  taxation penalty.

Question 17

A fall in income that results in a decrease in tax revenues is an example of ________.

Accepted Answer

A)  automatic fiscal policy 
B)  needs-tested tax programs 
C)  a recession 
D)  discretionary fiscal policy 
A)  automatic fiscal policy 
B)  needs-tested tax programs 
C)  a recession 
D)  discretionary fiscal policy

Question 18

A cyclical surplus is a

Accepted Answer

A)  budget surplus only because real GDP is less than potential GDP. 
B)  budget surplus only because real GDP is greater than potential GDP. 
C)  budget surplus only because real GDP is equal to potential GDP. 
D)  nominal, as opposed to real, budget surplus. 
A)  budget surplus only because real GDP is less than potential GDP. 
B)  budget surplus only because real GDP is greater than potential GDP. 
C)  budget surplus only because real GDP is equal to potential GDP. 
D)  nominal, as opposed to real, budget surplus.

Question 19

The largest source of government revenues is ________.

Accepted Answer

A)  personal income taxes 
B)  indirect taxes 
C)  corporate income taxes 
D)  Social Security taxes 
A)  personal income taxes 
B)  indirect taxes 
C)  corporate income taxes 
D)  Social Security taxes

Question 20

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.

One characteristic of automatic fiscal policy is that it

A discretionary fiscal policy is a fiscal policy that

The Laffer curve is the relationship between

In early 2013, economists predicted that the U.S. economy would grow more rapidly than had been predicted. If this prediction comes true, then the structural deficit will ________ than had been predicted.

What is needs-tested spending and how does it affect the government expenditure multiplier?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

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

A government that currently has a budget deficit can balance its budget by ________.

A government incurs a budget deficit when

The difference between automatic fiscal policy and discretionary fiscal policy is that

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.

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 .

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

If tax receipts are greater than government outlays the government has a budget surplus.

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

The difference between the before-tax and after-tax rates is referred to as the

A fall in income that results in a decrease in tax revenues is an example of ________.

A cyclical surplus is a

The largest source of government revenues is ________.

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

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

One characteristic of automatic fiscal policy is that it

A discretionary fiscal policy is a fiscal policy that

The Laffer curve is the relationship between

In early 2013, economists predicted that the U.S. economy would grow more rapidly than had been predicted. If this prediction comes true, then the structural deficit will ________ than had been predicted.

What is needs-tested spending and how does it affect the government expenditure multiplier?

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

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

A government that currently has a budget deficit can balance its budget by ________.

A government incurs a budget deficit when

The difference between automatic fiscal policy and discretionary fiscal policy is that

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.

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 ________.

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

If tax receipts are greater than government outlays the government has a budget surplus.

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

The difference between the before-tax and after-tax rates is referred to as the

A fall in income that results in a decrease in tax revenues is an example of ________.

A cyclical surplus is a

The largest source of government revenues is ________.

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

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

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 .