Exam 13: Fiscal Policy, Deficits, and Debt

The intent of contractionary fiscal policy is to:

The more progressive the tax system, the:

Expansionary fiscal policy will tend to reduce the budget deficit.

Which would tend to reduce the crowding-out effect that occurs when the Federal government increases its borrowing to finance a deficit?

The crowding-out effect will be minimal when the economy is in a severe recession.

A budget surplus means that:

If you are told that the government had an actual budget deficit of $50 billion, then you would:

Which of the following nations had the highest public sector debt as a percentage of GDP in 2012?

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement:

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely:

The crowding-out effect arises when:

One timing problem in using fiscal policy to counter a recession is the "operational lag" that occurs between the:

The American Recovery and Reinvestment Act of 2009 is a clear example of:

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that:

Refer to the above graph. What combination would most likely cause a shift from AD₁ to AD₃?

When government spending is increased, the amount of the increase in aggregate demand primarily depends on:

Assume that if there was no crowding-out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding-out, then GDP would have:

The cyclically-adjusted budget estimates the Federal budget deficit or surplus if:

An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government raise taxes to achieve its objective?