Question 1

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

Accepted Answer

A) True 
 B)False

Question 2

The total value of U.S.Treasury bonds outstanding equals

Accepted Answer

A) the federal government deficit. 
B) the federal government surplus. 
C) the federal government debt. 
D) the cyclically adjusted budget deficit. 
A) the federal government deficit. 
B) the federal government surplus. 
C) the federal government debt. 
D) the cyclically adjusted budget deficit.

Question 3

Which of the following would increase the size of the government purchases multiplier?

Accepted Answer

A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income 
A) an increase in the tax rate 
B) an increase in the quantity of imports purchased by households from an increase in income 
C) a decrease in the amount of consumption spending by households from an increase in income 
D) a decrease in the amount saved by households from an increase in income

Question 4

Social Security

Accepted Answer

A) has not been successful in reducing poverty among elderly Americans. 
B) is a system whereby current retirees are paid from taxes collected from current workers. 
C) has a greater number of workers per retiree today as compared to when it started. 
D) currently pays retirees benefits equal to what they paid into the system. 
A) has not been successful in reducing poverty among elderly Americans. 
B) is a system whereby current retirees are paid from taxes collected from current workers. 
C) has a greater number of workers per retiree today as compared to when it started. 
D) currently pays retirees benefits equal to what they paid into the system.

Question 5

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

Accepted Answer

A) automatic stabilizers. 
B) discretionary fiscal policy. 
C) discretionary monetary policy. 
D) automatic monetary policy. 
A) automatic stabilizers. 
B) discretionary fiscal policy. 
C) discretionary monetary policy. 
D) automatic monetary policy.

Question 6

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of ________ and two-thirds took the form of increases in ________.

Accepted Answer

A) discretionary government spending; transfer payments 
B) tax rebates; tax cuts 
C) treasury bond purchases; the money supply 
D) tax cuts; government expenditures 
A) discretionary government spending; transfer payments 
B) tax rebates; tax cuts 
C) treasury bond purchases; the money supply 
D) tax cuts; government expenditures

Question 7

________ and ________ are the largest sources of revenue collected by the federal government.

Accepted Answer

A) Individual income taxes; corporate income taxes 
B) Individual income taxes; social insurance taxes 
C) Corporate income taxes; excise and other taxes 
D) Excise and other taxes; individual income taxes 
A) Individual income taxes; corporate income taxes 
B) Individual income taxes; social insurance taxes 
C) Corporate income taxes; excise and other taxes 
D) Excise and other taxes; individual income taxes

Question 8

The income tax system serves as an automatic stabilizer over the course of the business cycle.

Accepted Answer

A) True 
 B)False

Question 9

Crowding out will be greater

Accepted Answer

A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession,rather than at full employment. 
A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession,rather than at full employment.

Question 10

Which of the following would be considered an active fiscal policy?

Accepted Answer

A) The Fed increases the money supply. 
B) Tax incentives are offered to encourage the purchase of fuel efficient cars. 
C) Spending on the war in Afghanistan is increased to promote homeland security. 
D) A tax cut is designed to stimulate spending passed during a recession. 
A) The Fed increases the money supply. 
B) Tax incentives are offered to encourage the purchase of fuel efficient cars. 
C) Spending on the war in Afghanistan is increased to promote homeland security. 
D) A tax cut is designed to stimulate spending passed during a recession.

Question 11

Suppose Political Party A proposes a tax cut on business income to stimulate the economy.Political Party B opposes the tax cut on business income asserting that it would only help businesses,not the average working man and woman.If you were hired as an economist for Political Party A,explain how the tax cut on business income would help the average working man and woman.

Accepted Answer

The multiplier effect would spread the e

Question 12

Figure 16-2  
-Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Accepted Answer

A) decrease the required reserve ratio. 
B) sell government securities. 
C) increase government expenditures. 
D) decrease transfer payments. 
A) decrease the required reserve ratio. 
B) sell government securities. 
C) increase government expenditures. 
D) decrease transfer payments.

Question 13

In an open economy,the government purchases multiplier will be larger the

Accepted Answer

A) smaller the marginal propensity to import. 
B) smaller the marginal income tax rate. 
C) larger the marginal propensity to consume. 
D) All of the above are correct. 
A) smaller the marginal propensity to import. 
B) smaller the marginal income tax rate. 
C) larger the marginal propensity to consume. 
D) All of the above are correct.

Question 14

What is fiscal policy,and who is responsible for fiscal policy?

Accepted Answer

Fiscal policy refers to change

Question 15

When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,an $840 billion package of spending increases and tax cuts that was

Accepted Answer

A) the largest fiscal policy action in U.S.history. 
B) second in size only to the fiscal policy action taken during the Great Depression. 
C) small in comparison to the actions taken during the recession of 1974-1975 
D) roughly equal to the spending increases and tax cuts implemented during the recession of 1980-1982. 
A) the largest fiscal policy action in U.S.history. 
B) second in size only to the fiscal policy action taken during the Great Depression. 
C) small in comparison to the actions taken during the recession of 1974-1975 
D) roughly equal to the spending increases and tax cuts implemented during the recession of 1980-1982.

Question 16

Consider the following statement,"The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?

Accepted Answer

The Federal Reserve fights recessions by

Question 17

Government transfer payments include which of the following?

Accepted Answer

A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense 
A) interest on the national debt 
B) grants to state and local governments 
C) Social Security and Medicare programs 
D) national defense

Question 18

If tax reduction and simplification are effective,then

Accepted Answer

A) real wages will rise as labor supply and demand increase. 
B) saving and investment in new capital will increase. 
C) interest rates will rise in financial markets and demand for financial assets falls. 
D) fewer new firms will be established,since existing firms will make more profit. 
A) real wages will rise as labor supply and demand increase. 
B) saving and investment in new capital will increase. 
C) interest rates will rise in financial markets and demand for financial assets falls. 
D) fewer new firms will be established,since existing firms will make more profit.

Question 19

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 20

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

Accepted Answer

A) True 
 B)False

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

The total value of U.S.Treasury bonds outstanding equals

Which of the following would increase the size of the government purchases multiplier?

Social Security

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of and two-thirds took the form of increases in .

and are the largest sources of revenue collected by the federal government.

The income tax system serves as an automatic stabilizer over the course of the business cycle.

Crowding out will be greater

Which of the following would be considered an active fiscal policy?

Figure 16-2 -Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

In an open economy,the government purchases multiplier will be larger the

What is fiscal policy,and who is responsible for fiscal policy?

When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,an $840 billion package of spending increases and tax cuts that was

Consider the following statement,"The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?

Government transfer payments include which of the following?

If tax reduction and simplification are effective,then

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 16: Fiscal Policy

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

The total value of U.S.Treasury bonds outstanding equals

Which of the following would increase the size of the government purchases multiplier?

Social Security

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of ________ and two-thirds took the form of increases in ________.

________ and ________ are the largest sources of revenue collected by the federal government.

The income tax system serves as an automatic stabilizer over the course of the business cycle.

Crowding out will be greater

Which of the following would be considered an active fiscal policy?

Figure 16-2 -Refer to Figure 16-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

In an open economy,the government purchases multiplier will be larger the

What is fiscal policy,and who is responsible for fiscal policy?

When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,an $840 billion package of spending increases and tax cuts that was

Consider the following statement,"The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?

Government transfer payments include which of the following?

If tax reduction and simplification are effective,then

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

An increase in government spending lowers interest rates and increases the rate of investment in new capital.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately one-third took the form of and two-thirds took the form of increases in .

and are the largest sources of revenue collected by the federal government.