Question 1

A deficit resulting from the use of discretionary fiscal policy

Accepted Answer

A) increases interest rates 
B) decreases interest rates 
C) increases interest rates if the effect of the decrease in the demand for money is greater than the effect of the increase in the supply of government securities 
D) increases interest rates if the effect of the decrease in the demand for money is less than the effect of the increase in the supply of government securities 
E) increases interest rates if the effect of the increase in the demand for money is greater than the effect of the decrease in the supply of government securities 
A) increases interest rates 
B) decreases interest rates 
C) increases interest rates if the effect of the decrease in the demand for money is greater than the effect of the increase in the supply of government securities 
D) increases interest rates if the effect of the decrease in the demand for money is less than the effect of the increase in the supply of government securities 
E) increases interest rates if the effect of the increase in the demand for money is greater than the effect of the decrease in the supply of government securities

Question 2

Which component of aggregate expenditure is most subject to crowding out?

Accepted Answer

A) consumption expenditures 
B) investment spending 
C) U.S.imports 
D) government purchases of goods and services 
E) saving 
A) consumption expenditures 
B) investment spending 
C) U.S.imports 
D) government purchases of goods and services 
E) saving

Question 3

Approximately what percentage of the U.S.federal budget was used for Welfare payments (on the national debt)in 2012?

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 15 percent 
D) 20 percent 
E) 30 percent 
A) 5 percent 
B) 10 percent 
C) 15 percent 
D) 20 percent 
E) 30 percent

Question 4

Approximately what proportion of the U.S.federal budget was spent on national defense in 2012?

Accepted Answer

A) 10 percent 
B) 20 percent 
C) 40 percent 
D) 50 percent 
E) 60 percent 
A) 10 percent 
B) 20 percent 
C) 40 percent 
D) 50 percent 
E) 60 percent

Question 5

The Budget of the United States Government is officially submitted by

Accepted Answer

A) the President to the Congress and contains proposals for government expenditures 
B) the Congress to the President and contains proposals for government expenditures 
C) the President to the Congress and contains proposals for tax increases 
D) the Congress to the President and contains proposals for tax increases 
E) the President to the Congress and it is reviewed by the Supreme Court 
A) the President to the Congress and contains proposals for government expenditures 
B) the Congress to the President and contains proposals for government expenditures 
C) the President to the Congress and contains proposals for tax increases 
D) the Congress to the President and contains proposals for tax increases 
E) the President to the Congress and it is reviewed by the Supreme Court

Question 6

The most rapid period of growth of the federal debt in the past 50 years was the 15 year period beginning just after World War II ended.

Accepted Answer

A) True 
 B)False

Question 7

The President's budget is presented to Congress each year

Accepted Answer

A) in the Economic Report of the President 
B) in a report followed shortly by the Economic Report of the President 
C) at the beginning of the fiscal year 
D) in a form that must be voted up or down within 60 days 
E) and requires a two-third vote for ratification 
A) in the Economic Report of the President 
B) in a report followed shortly by the Economic Report of the President 
C) at the beginning of the fiscal year 
D) in a form that must be voted up or down within 60 days 
E) and requires a two-third vote for ratification

Question 8

A continuing resolution provides authorization for continuing agency operation even after its budget has expired.

Accepted Answer

A) True 
 B)False

Question 9

If aggregate output is falling,

Accepted Answer

A) both b and e 
B) tax revenue increases 
C) automatic stabilizers will tend to increase the size of the deficit 
D) automatic stabilizers will tend to decrease the size of the deficit 
E) transfer payments decrease as fewer people become eligible for public assistance 
A) both b and e 
B) tax revenue increases 
C) automatic stabilizers will tend to increase the size of the deficit 
D) automatic stabilizers will tend to decrease the size of the deficit 
E) transfer payments decrease as fewer people become eligible for public assistance

Question 10

It is impossible for the budget deficit to change unless there is a change in discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 11

A possible explanation for the persistence of the U.S.federal budget deficits is that

Accepted Answer

A) it is easier politically to increase government spending than to decrease taxes 
B) it is easier politically to decrease government spending than to decrease taxes 
C) it is easier politically to increase government spending than to increase taxes 
D) the economy naturally tends toward recessions 
E) the economy naturally tends toward full employment 
A) it is easier politically to increase government spending than to decrease taxes 
B) it is easier politically to decrease government spending than to decrease taxes 
C) it is easier politically to increase government spending than to increase taxes 
D) the economy naturally tends toward recessions 
E) the economy naturally tends toward full employment

Question 12

About three-quarters of the federal budget involves expenditure categories that are fixed by law (e.g.,Social Security)and cannot readily be changed.

Accepted Answer

A) True 
 B)False

Question 13

What were the chief links between the U.S.federal budget deficit and the U.S.trade deficit during the 1980s?

Accepted Answer

A) High U.S.interest rates led to a rise in the relative value of the dollar. 
B) High U.S.interest rates led to a decrease in the relative value of the dollar. 
C) U.S.interest rates fell relative to foreign rates and thus the dollar appreciated. 
D) The U.S.price level declined relative to that of foreign countries,causing U.S.interest rates to fall. 
E) The recessions of 1980 and 1981-1982 were the key links; recession widened the budget deficit and this caused the U.S.price level to fall,enabling foreigners to invest in U.S.assets. 
A) High U.S.interest rates led to a rise in the relative value of the dollar. 
B) High U.S.interest rates led to a decrease in the relative value of the dollar. 
C) U.S.interest rates fell relative to foreign rates and thus the dollar appreciated. 
D) The U.S.price level declined relative to that of foreign countries,causing U.S.interest rates to fall. 
E) The recessions of 1980 and 1981-1982 were the key links; recession widened the budget deficit and this caused the U.S.price level to fall,enabling foreigners to invest in U.S.assets.

Question 14

Which of the following is not a form of crowding out?

Accepted Answer

A) lower household spending due to higher interest rates 
B) lower business spending due to higher interest rates 
C) lower net exports due to higher interest rates 
D) lower private spending due to higher taxes 
E) none of the above; they all represent crowding out 
A) lower household spending due to higher interest rates 
B) lower business spending due to higher interest rates 
C) lower net exports due to higher interest rates 
D) lower private spending due to higher taxes 
E) none of the above; they all represent crowding out

Question 15

The federal budget deficit becomes __________ during recessions because __________.

Accepted Answer

A) smaller; transfer payments increase and tax revenues decline 
B) larger; transfer payments increase and tax revenues decline 
C) larger; both transfer payments and tax revenues increase 
D) smaller; both transfer payments and tax revenues increase 
E) smaller; both transfer payments and tax revenues decrease 
A) smaller; transfer payments increase and tax revenues decline 
B) larger; transfer payments increase and tax revenues decline 
C) larger; both transfer payments and tax revenues increase 
D) smaller; both transfer payments and tax revenues increase 
E) smaller; both transfer payments and tax revenues decrease

Question 16

The entire U.S.federal budget process,beginning with delivery of the President's budget to Congress and ending with the beginning of the fiscal year,takes about

Accepted Answer

A) one month 
B) six months 
C) nine months 
D) one year 
E) three months 
A) one month 
B) six months 
C) nine months 
D) one year 
E) three months

Question 17

Continuing resolutions are legislative actions undertaken to balance the budget.

Accepted Answer

A) True 
 B)False

Question 18

If the deficit is increasing because of the effects of the automatic stabilizers,

Accepted Answer

A) all of the following 
B) the economy is contracting 
C) the annual deficit will approach zero 
D) the budget is cyclically balanced 
E) the economy is growing 
A) all of the following 
B) the economy is contracting 
C) the annual deficit will approach zero 
D) the budget is cyclically balanced 
E) the economy is growing

Question 19

The budget deficit tends to decline during periods of recession and to increase during periods of economic recovery.

Accepted Answer

A) True 
 B)False

Question 20

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed over a number of years and therefore involve deficit finance.

Accepted Answer

A) True 
 B)False

Exam 13: Federal Budgets and Public Policy

A deficit resulting from the use of discretionary fiscal policy

Which component of aggregate expenditure is most subject to crowding out?

Approximately what percentage of the U.S.federal budget was used for Welfare payments (on the national debt)in 2012?

Approximately what proportion of the U.S.federal budget was spent on national defense in 2012?

The Budget of the United States Government is officially submitted by

The most rapid period of growth of the federal debt in the past 50 years was the 15 year period beginning just after World War II ended.

The President's budget is presented to Congress each year

A continuing resolution provides authorization for continuing agency operation even after its budget has expired.

If aggregate output is falling,

It is impossible for the budget deficit to change unless there is a change in discretionary fiscal policy.

A possible explanation for the persistence of the U.S.federal budget deficits is that

About three-quarters of the federal budget involves expenditure categories that are fixed by law (e.g.,Social Security)and cannot readily be changed.

What were the chief links between the U.S.federal budget deficit and the U.S.trade deficit during the 1980s?

Which of the following is not a form of crowding out?

The federal budget deficit becomes __________ during recessions because __________.

The entire U.S.federal budget process,beginning with delivery of the President's budget to Congress and ending with the beginning of the fiscal year,takes about

Continuing resolutions are legislative actions undertaken to balance the budget.

If the deficit is increasing because of the effects of the automatic stabilizers,

The budget deficit tends to decline during periods of recession and to increase during periods of economic recovery.

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed over a number of years and therefore involve deficit finance.

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

The federal budget deficit becomes during recessions because .