Question 1

If the government reduces expenditure on goods and services by $30 billion,then aggregate demand

Accepted Answer

A) decreases by more than $30 billion and real GDP decreases. 
B) decreases by $30 billion and real GDP decreases. 
C) increases by $30 billion and real GDP increases. 
D) increases and potential GDP increases. 
E) increases by more than $30 billion and real GDP increases. 
A) decreases by more than $30 billion and real GDP decreases. 
B) decreases by $30 billion and real GDP decreases. 
C) increases by $30 billion and real GDP increases. 
D) increases and potential GDP increases. 
E) increases by more than $30 billion and real GDP increases.

Question 2

Automatic stabilizers

Accepted Answer

A) increase the magnitude of the government expenditure multiplier. 
B) decrease the magnitude of the government expenditure multiplier. 
C) have no effect on the magnitude of the government expenditure multiplier. 
D) reduce the government expenditure multiplier to zero. 
E) increase the magnitude of the tax multiplier. 
A) increase the magnitude of the government expenditure multiplier. 
B) decrease the magnitude of the government expenditure multiplier. 
C) have no effect on the magnitude of the government expenditure multiplier. 
D) reduce the government expenditure multiplier to zero. 
E) increase the magnitude of the tax multiplier.

Question 3

If the Fed increases interest rates,other things remaining the same,foreigners demand ________ dollars thereby ________ the exchange rate.

Accepted Answer

A) more;increasing 
B) more;decreasing 
C) fewer;increasing 
D) fewer;decreasing 
E) the same number of;not affecting 
A) more;increasing 
B) more;decreasing 
C) fewer;increasing 
D) fewer;decreasing 
E) the same number of;not affecting

Question 4

Which of the following statements are correct?
I.The Federal Reserve's monetary policy must be approved by the President of the United States .
Ii.The Federal Reserve Board of Directors meets approximately every six months to review the state of the economy and determine monetary policy.
Iii.The Federal Reserve has determined it will use the monetary base as its policy instrument.

Accepted Answer

A) i and ii 
B) ii only 
C) i only 
D) iii only 
E) None of the above answers is correct. 
A) i and ii 
B) ii only 
C) i only 
D) iii only 
E) None of the above answers is correct.

Question 5

Do automatic fiscal stabilizers eliminate business cycles?

Accepted Answer

A) Yes 
B) No,because they have no effect if the business cycle is the result of some unanticipated change 
C) No,but they do moderate business cycles 
D) No,they increase the likelihood that a business cycle occurs 
E) No,they make business cycle fluctuations more severe 
A) Yes 
B) No,because they have no effect if the business cycle is the result of some unanticipated change 
C) No,but they do moderate business cycles 
D) No,they increase the likelihood that a business cycle occurs 
E) No,they make business cycle fluctuations more severe

Question 6

After the Fed raises the federal funds rate,the effects on the economy can take up to two years before they occur.Is this statement accurate? Lay out the time path of how an increase in the federal funds rate affects the economy.

Accepted Answer

The statement is accurate.While there ar

Question 7

The table above gives a nation's government outlays and tax revenue for 2008 through 2012.
-During which years,if any,did the country have a balanced budget?

Accepted Answer

A) 2008 and 2009 
B) 2012 only 
C) 2011 only 
D) 2010 and 2012 
E) all except 2011 
A) 2008 and 2009 
B) 2012 only 
C) 2011 only 
D) 2010 and 2012 
E) all except 2011

Question 8

-In the above figure,is the Fed likely to be afraid that inflation will occur or that a recession will occur? Discuss the appropriate monetary policy that should be made to restore the economy to potential GDP.

Accepted Answer

The Fed will fear inflation.The economy

Question 9

The government collects tax revenue of $100 million and has $105 million in outlays.The budget balance is a

Accepted Answer

A) surplus of $5 million. 
B) deficit of $5 million. 
C) surplus of $105 million. 
D) deficit of $105 million. 
E) surplus of $100 million and a deficit of $105 million. 
A) surplus of $5 million. 
B) deficit of $5 million. 
C) surplus of $105 million. 
D) deficit of $105 million. 
E) surplus of $100 million and a deficit of $105 million.

Question 10

Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply.

Accepted Answer

Some types of government expenditure pro

Question 11

Describe the difference between discretionary and automatic fiscal policy.

Accepted Answer

Discretionary fiscal policy is

Question 12

During a recession,unemployment compensation payments increase without the need for any government action.This increase is an example of

Accepted Answer

A) discretionary monetary policy. 
B) automatic monetary policy. 
C) automatic fiscal policy. 
D) discretionary fiscal policy. 
E) government expenditure,but it is not an example of either discretionary or automatic policy. 
A) discretionary monetary policy. 
B) automatic monetary policy. 
C) automatic fiscal policy. 
D) discretionary fiscal policy. 
E) government expenditure,but it is not an example of either discretionary or automatic policy.

Question 13

When government outlays exceed tax revenue,the situation is called a budget

Accepted Answer

A) with a negative balance. 
B) deficit. 
C) surplus. 
D) debt. 
E) with no balance. 
A) with a negative balance. 
B) deficit. 
C) surplus. 
D) debt. 
E) with no balance.

Question 14

A change in monetary policy affects

Accepted Answer

A) consumption expenditure,government expenditures on goods and services,and net exports. 
B) consumption expenditure,investment,and net exports. 
C) investment,government expenditures on goods and services,and net exports. 
D) consumption expenditure,productivity,and net exports. 
E) government expenditures on goods and services because it affects the government's budget balance. 
A) consumption expenditure,government expenditures on goods and services,and net exports. 
B) consumption expenditure,investment,and net exports. 
C) investment,government expenditures on goods and services,and net exports. 
D) consumption expenditure,productivity,and net exports. 
E) government expenditures on goods and services because it affects the government's budget balance.

Question 15

The national debt is the amount

Accepted Answer

A) by which government tax revenue exceed outlays in a given year. 
B) of debt outstanding that arises from past budget deficits. 
C) by which government outlays exceed tax revenue in a given year. 
D) of government outlays summed over time. 
E) of all future entitlement spending. 
A) by which government tax revenue exceed outlays in a given year. 
B) of debt outstanding that arises from past budget deficits. 
C) by which government outlays exceed tax revenue in a given year. 
D) of government outlays summed over time. 
E) of all future entitlement spending.

Question 16

Raising the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.

Accepted Answer

A) rightward;increases;rises 
B) leftward;decreases;rises 
C) rightward;increases;falls 
D) leftward;decreases;falls 
E) leftward;increases;rises 
A) rightward;increases;rises 
B) leftward;decreases;rises 
C) rightward;increases;falls 
D) leftward;decreases;falls 
E) leftward;increases;rises

Question 17

If the Fed is concerned about a possible recession,it ________ the federal funds rate and,in response,long-term interest rates ________ by a ________ amount than the change in short-term rates.

Accepted Answer

A) raises;increase;larger 
B) lowers;increase;smaller 
C) raises;decrease;larger 
D) lowers;decrease;smaller 
E) raises;increase;smaller 
A) raises;increase;larger 
B) lowers;increase;smaller 
C) raises;decrease;larger 
D) lowers;decrease;smaller 
E) raises;increase;smaller

Question 18

Government expenditure ________ change potential GDP and taxes ________ change potential GDP.

Accepted Answer

A) can;can 
B) cannot;can 
C) can;cannot 
D) cannot;cannot 
E) None of the above answers is correct. 
A) can;can 
B) cannot;can 
C) can;cannot 
D) cannot;cannot 
E) None of the above answers is correct.

Question 19

In the United States,

Accepted Answer

A) Congress must approve monetary policy changes. 
B) Congress initializes changes in monetary policy and the Fed approves the changes. 
C) the Federal Reserve sets monetary policy. 
D) the Federal Reserve sets monetary and fiscal policies. 
E) the President initializes changes in monetary policy and the Fed approves the changes. 
A) Congress must approve monetary policy changes. 
B) Congress initializes changes in monetary policy and the Fed approves the changes. 
C) the Federal Reserve sets monetary policy. 
D) the Federal Reserve sets monetary and fiscal policies. 
E) the President initializes changes in monetary policy and the Fed approves the changes.

Question 20

Which of the following is NOT an effect from a change in the federal funds rate?

Accepted Answer

A) change in the real interest rate 
B) change in investment 
C) change in government expenditures 
D) change in aggregate demand 
E) change in the quantity of money 
A) change in the real interest rate 
B) change in investment 
C) change in government expenditures 
D) change in aggregate demand 
E) change in the quantity of money

If the government reduces expenditure on goods and services by $30 billion,then aggregate demand

Automatic stabilizers

If the Fed increases interest rates,other things remaining the same,foreigners demand dollars thereby the exchange rate.

Do automatic fiscal stabilizers eliminate business cycles?

After the Fed raises the federal funds rate,the effects on the economy can take up to two years before they occur.Is this statement accurate? Lay out the time path of how an increase in the federal funds rate affects the economy.

The table above gives a nation's government outlays and tax revenue for 2008 through 2012. -During which years,if any,did the country have a balanced budget?

-In the above figure,is the Fed likely to be afraid that inflation will occur or that a recession will occur? Discuss the appropriate monetary policy that should be made to restore the economy to potential GDP.

The government collects tax revenue of $100 million and has $105 million in outlays.The budget balance is a

Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply.

Describe the difference between discretionary and automatic fiscal policy.

During a recession,unemployment compensation payments increase without the need for any government action.This increase is an example of

When government outlays exceed tax revenue,the situation is called a budget

A change in monetary policy affects

The national debt is the amount

Raising the federal funds rate shifts the aggregate demand curve so that real GDP and the price level .

If the Fed is concerned about a possible recession,it the federal funds rate and,in response,long-term interest rates by a amount than the change in short-term rates.

Government expenditure change potential GDP and taxes change potential GDP.

In the United States,

Which of the following is NOT an effect from a change in the federal funds rate?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Filters

Exam 20: Fiscal Policy and Monetary Policy

If the government reduces expenditure on goods and services by $30 billion,then aggregate demand

Automatic stabilizers

If the Fed increases interest rates,other things remaining the same,foreigners demand ________ dollars thereby ________ the exchange rate.

Do automatic fiscal stabilizers eliminate business cycles?

After the Fed raises the federal funds rate,the effects on the economy can take up to two years before they occur.Is this statement accurate? Lay out the time path of how an increase in the federal funds rate affects the economy.

The table above gives a nation's government outlays and tax revenue for 2008 through 2012. -During which years,if any,did the country have a balanced budget?

-In the above figure,is the Fed likely to be afraid that inflation will occur or that a recession will occur? Discuss the appropriate monetary policy that should be made to restore the economy to potential GDP.

The government collects tax revenue of $100 million and has $105 million in outlays.The budget balance is a

Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply.

Describe the difference between discretionary and automatic fiscal policy.

During a recession,unemployment compensation payments increase without the need for any government action.This increase is an example of

When government outlays exceed tax revenue,the situation is called a budget

A change in monetary policy affects

The national debt is the amount

Raising the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.

If the Fed is concerned about a possible recession,it ________ the federal funds rate and,in response,long-term interest rates ________ by a ________ amount than the change in short-term rates.

Government expenditure ________ change potential GDP and taxes ________ change potential GDP.

In the United States,

Which of the following is NOT an effect from a change in the federal funds rate?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Filters

If the Fed increases interest rates,other things remaining the same,foreigners demand dollars thereby the exchange rate.

Raising the federal funds rate shifts the aggregate demand curve so that real GDP and the price level .

If the Fed is concerned about a possible recession,it the federal funds rate and,in response,long-term interest rates by a amount than the change in short-term rates.

Government expenditure change potential GDP and taxes change potential GDP.