Question 1

Exhibit 11-2  
-Refer to Exhibit 11-2.At point A,if we cut tax rates slightly,tax revenues will

Accepted Answer

A) increase. 
B) decrease. 
C) will not change. 
D) drop to zero. 
A) increase. 
B) decrease. 
C) will not change. 
D) drop to zero.

Question 2

A balanced budget occurs when

Accepted Answer

A) the national debt is reduced to zero dollars. 
B) a budget deficit during one year is matched by a budget surplus in the next year. 
C) transfer payments equal tax revenues. 
D) government expenditures equal tax revenues. 
E) the deficit-GDP ratio equals one. 
A) the national debt is reduced to zero dollars. 
B) a budget deficit during one year is matched by a budget surplus in the next year. 
C) transfer payments equal tax revenues. 
D) government expenditures equal tax revenues. 
E) the deficit-GDP ratio equals one.

Question 3

The AD curve shifts to the right with an increase in taxes or a decrease in government purchases.

Accepted Answer

A) True 
 B)False

Question 4

When we speak of expansionary fiscal policy,we are talking about policymakers __________ government spending,or __________ taxes,or both.

Accepted Answer

A) decreasing;decreasing 
B) increasing;increasing 
C) increasing;decreasing 
D) decreasing;increasing 
A) decreasing;decreasing 
B) increasing;increasing 
C) increasing;decreasing 
D) decreasing;increasing

Question 5

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,001st dollar of taxable income earned?

Accepted Answer

A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question. 
A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question.

Question 6

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,000th of dollar of taxable income earned?

Accepted Answer

A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question. 
A) 15% 
B) 20% 
C) 25% 
D) 30% 
E) There is not enough information provided to answer this question.

Question 7

Which of the following illustrates the data lag?

Accepted Answer

A) The economy turns down on January 8,2006,but policymakers do not figure this out until April 19,2006. 
B) Policymakers wait and see what is really going on with the economy. 
C) Policymakers implement policy X on September 12,2006,but the effects are not felt until six months later. 
D) The data lag is illustrated equally well by a,b,and C 
A) The economy turns down on January 8,2006,but policymakers do not figure this out until April 19,2006. 
B) Policymakers wait and see what is really going on with the economy. 
C) Policymakers implement policy X on September 12,2006,but the effects are not felt until six months later. 
D) The data lag is illustrated equally well by a,b,and C

Question 8

Describe the fiscal policy remedies that a Keynesian economist might prescribe to close a recessionary gap.How might the issue of crowding out impact the effectiveness of these policies?

Accepted Answer

To close a recessionary gap,a Keynesian

Question 9

Exhibit 11-1  
-Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is no crowding out.As a result,the aggregate demand (AD)curve in the exhibit

Accepted Answer

A) maintains its present position at AD1. 
B) shifts rightward,ideally so that it goes through point 2. 
C) shifts rightward,ideally so that it goes beyond point 2. 
D) shifts leftward. 
E) ​does not shift,but the SRAS curve will shift rightward so that it goes through point 3. 
A) maintains its present position at AD1. 
B) shifts rightward,ideally so that it goes through point 2. 
C) shifts rightward,ideally so that it goes beyond point 2. 
D) shifts leftward. 
E) ​does not shift,but the SRAS curve will shift rightward so that it goes through point 3.

Question 10

Tax revenues can be found by

Accepted Answer

A) multiplying the tax base by the (average)tax rate. 
B) dividing the tax base by the (average)tax rate. 
C) summing the tax base and the (average)tax rate. 
D) multiplying taxable income by the marginal tax rate. 
A) multiplying the tax base by the (average)tax rate. 
B) dividing the tax base by the (average)tax rate. 
C) summing the tax base and the (average)tax rate. 
D) multiplying taxable income by the marginal tax rate.

Question 11

To finance a budget deficit the federal government borrows funds.

Accepted Answer

A) True 
 B)False

Question 12

Fiscal policy is

Accepted Answer

A) the money supply policy that the Fed pursues to achieve particular economic goals. 
B) the spending and tax policy that the government pursues to achieve particular macroeconomic goals. 
C) the investment policy that businesses pursue to achieve particular macroeconomic goals. 
D) the spending and saving policy that consumers pursue to achieve particular macroeconomic goals. 
E) none of the above 
A) the money supply policy that the Fed pursues to achieve particular economic goals. 
B) the spending and tax policy that the government pursues to achieve particular macroeconomic goals. 
C) the investment policy that businesses pursue to achieve particular macroeconomic goals. 
D) the spending and saving policy that consumers pursue to achieve particular macroeconomic goals. 
E) none of the above

Question 13

The answer is: "Policymakers are not aware of changes in the economy as soon as they happen." What is the question?

Accepted Answer

A) What is the wait-and-see lag? 
B) What is the data lag? 
C) What is the effectiveness lag? 
D) What is the transmission lag? 
E) none of the above 
A) What is the wait-and-see lag? 
B) What is the data lag? 
C) What is the effectiveness lag? 
D) What is the transmission lag? 
E) none of the above

Question 14

Fiscal policy refers to

Accepted Answer

A) changes in the amount of government expenditures and taxes to achieve particular economic objectives. 
B) changes in the composition of a given amount of government expenditures to achieve particular economic objectives. 
C) changes in interest rates initiated by government action. 
D) any change in government spending or taxes that has the intended effect of destabilizing the economy. 
A) changes in the amount of government expenditures and taxes to achieve particular economic objectives. 
B) changes in the composition of a given amount of government expenditures to achieve particular economic objectives. 
C) changes in interest rates initiated by government action. 
D) any change in government spending or taxes that has the intended effect of destabilizing the economy.

Question 15

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

Accepted Answer

A) net 
B) gross 
C) cyclical 
D) structural 
A) net 
B) gross 
C) cyclical 
D) structural

Question 16

What are the two types of discretionary fiscal policy?

Accepted Answer

A) automatic and expansionary 
B) expansionary and contractionary 
C) expansionary and recessionary 
D) automatic and contractionary 
A) automatic and expansionary 
B) expansionary and contractionary 
C) expansionary and recessionary 
D) automatic and contractionary

Question 17

Some of the crowding out of private expenditures may come in the form of

Accepted Answer

A) an increase in consumption. 
B) an increase in net exports. 
C) a decrease in taxes. 
D) a decrease in net exports. 
A) an increase in consumption. 
B) an increase in net exports. 
C) a decrease in taxes. 
D) a decrease in net exports.

Question 18

If company Z is receiving a government subsidy,the government is taking money from ____________ and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is ______________________.

Accepted Answer

A) taxpayers;paying more in taxes than it would without the tax deduction 
B) taxpayers;subsidizing the taxpayers 
C) Congress;paying more in taxes than it would without the tax deduction 
D) taxpayers;paying less in taxes than it would without the tax deduction 
A) taxpayers;paying more in taxes than it would without the tax deduction 
B) taxpayers;subsidizing the taxpayers 
C) Congress;paying more in taxes than it would without the tax deduction 
D) taxpayers;paying less in taxes than it would without the tax deduction

Question 19

A "flat tax" is another term for __________ tax.

Accepted Answer

A) a progressive 
B) a proportional 
C) a regressive 
D) the inflation 
A) a progressive 
B) a proportional 
C) a regressive 
D) the inflation

Question 20

Suppose the economy is in a recessionary gap.If government expenditures are currently $1.4 trillion and tax revenues are currently $1 trillion,the (total)budget deficit is _____________.Assume that economists estimate that if the economy were operating at full employment,government expenditures would be $1.2 trillion and tax revenues would be $1.1 trillion.The structural deficit is _________________ and the cyclical deficit is _______________.

Accepted Answer

A) $2.4 trillion;$2.2 trillion;$200 billion 
B) $400 billion;$300 billion;$100 billion 
C) $400 billion;$100 billion;$300 billion 
D) $300 billion;$100 billion;$400 billion 
A) $2.4 trillion;$2.2 trillion;$200 billion 
B) $400 billion;$300 billion;$100 billion 
C) $400 billion;$100 billion;$300 billion 
D) $300 billion;$100 billion;$400 billion

Exam 11: Fiscal Policy and the Federal Budget

Exhibit 11-2 -Refer to Exhibit 11-2.At point A,if we cut tax rates slightly,tax revenues will

A balanced budget occurs when

The AD curve shifts to the right with an increase in taxes or a decrease in government purchases.

When we speak of expansionary fiscal policy,we are talking about policymakers __________ government spending,or __________ taxes,or both.

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,001st dollar of taxable income earned?

Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,000th of dollar of taxable income earned?

Which of the following illustrates the data lag?

Describe the fiscal policy remedies that a Keynesian economist might prescribe to close a recessionary gap.How might the issue of crowding out impact the effectiveness of these policies?

Exhibit 11-1 -Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is no crowding out.As a result,the aggregate demand (AD)curve in the exhibit

Tax revenues can be found by

To finance a budget deficit the federal government borrows funds.

Fiscal policy is

The answer is: "Policymakers are not aware of changes in the economy as soon as they happen." What is the question?

Fiscal policy refers to

That part of the deficit that results from a downturn in economic activity is called the __________ deficit.

What are the two types of discretionary fiscal policy?

Some of the crowding out of private expenditures may come in the form of

If company Z is receiving a government subsidy,the government is taking money from ____________ and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is ______________________.

A "flat tax" is another term for __________ tax.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

When we speak of expansionary fiscal policy,we are talking about policymakers government spending,or taxes,or both.

If company Z is receiving a government subsidy,the government is taking money from and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is __________.