Question 1

If the Fed lowers the federal funds rate,which of the following occurs?

Accepted Answer

A) Investment increases. 
B) Consumption expenditure decreases. 
C) The price of the dollar on the foreign exchange market increases. 
D) Net exports decrease. 
E) Government expenditure on goods and services increases. 
A) Investment increases. 
B) Consumption expenditure decreases. 
C) The price of the dollar on the foreign exchange market increases. 
D) Net exports decrease. 
E) Government expenditure on goods and services increases.

Question 2

The magnitude of the tax multiplier is ________ the magnitude of the government expenditure multiplier.

Accepted Answer

A) equal to 
B) greater than 
C) smaller than 
D) the inverse of 
E) exactly one half 
A) equal to 
B) greater than 
C) smaller than 
D) the inverse of 
E) exactly one half

Question 3

An economic expansion leads to ________ needs-tested spending and ________ induced taxes.

Accepted Answer

A) higher;lower 
B) lower;higher 
C) higher;higher 
D) lower;lower 
E) lower;no change in 
A) higher;lower 
B) lower;higher 
C) higher;higher 
D) lower;lower 
E) lower;no change in

Question 4

Explain four reasons why it is difficult to use discretionary fiscal policy to eliminate a deflationary or inflationary gap.

Accepted Answer

Three limitations of using discretionary

Question 5

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

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 6

To eliminate a recessionary gap,what fiscal policy should the government pursue?

Accepted Answer

A recessionary gap occurs when

Question 7

Suppose the economy is in an equilibrium in which real GDP is less than potential GDP.To increase real GDP,the government can use a fiscal stimulus of

Accepted Answer

A) increasing taxes only. 
B) decreasing government expenditure only. 
C) decreasing taxes and/or increasing government expenditure. 
D) decreasing government expenditure and simultaneously increasing taxes. 
E) increasing the quantity of money. 
A) increasing taxes only. 
B) decreasing government expenditure only. 
C) decreasing taxes and/or increasing government expenditure. 
D) decreasing government expenditure and simultaneously increasing taxes. 
E) increasing the quantity of money.

Question 8

If the economy is in an equilibrium with real GDP less than potential GDP,a fiscal stimulus could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services.

Accepted Answer

A) raising;increasing 
B) raising;decreasing 
C) cutting;increasing 
D) cutting;decreasing 
E) raising;not changing 
A) raising;increasing 
B) raising;decreasing 
C) cutting;increasing 
D) cutting;decreasing 
E) raising;not changing

Question 9

What are automatic stabilizers? How do they help stabilize real GDP?

Accepted Answer

Automatic stabilizers are features of fi

Question 10

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP.
-In the figure above,the ________ gap is one trillion dollars.To close the gap,the government can ________ government expenditure and/or ________ taxes.

Accepted Answer

A) recessionary;increase;decrease 
B) inflationary;decrease;increase 
C) inflationary;increase;increase 
D) recessionary;decrease;decrease 
E) recessionary;decrease;increase 
A) recessionary;increase;decrease 
B) inflationary;decrease;increase 
C) inflationary;increase;increase 
D) recessionary;decrease;decrease 
E) recessionary;decrease;increase

Question 11

When the Fed ________ the federal funds rate,the opportunity cost of firms' investment ________ and so the quantity of investment ________.

Accepted Answer

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

Question 12

If government expenditure on goods and services increase by $100 billion,then aggregate demand

Accepted Answer

A) increases by $100 billion. 
B) increases by less than $100 billion. 
C) increases by more than $100 billion. 
D) remains unchanged. 
E) decreases by more than $100 billion. 
A) increases by $100 billion. 
B) increases by less than $100 billion. 
C) increases by more than $100 billion. 
D) remains unchanged. 
E) decreases by more than $100 billion.

Question 13

If the Fed is concerned about a possible recession,it ________ the federal funds rate,which ________ the quantity of money and ________ the amount of bank loans.

Accepted Answer

A) raises;decreases;decreases 
B) lowers;decreases;decreases 
C) lowers;increases;decreases 
D) raises;increases;increases 
E) lowers;increases;increases 
A) raises;decreases;decreases 
B) lowers;decreases;decreases 
C) lowers;increases;decreases 
D) raises;increases;increases 
E) lowers;increases;increases

Question 14

The government expenditure multiplier is used to determine the

Accepted Answer

A) extra scrutiny government action receives. 
B) amount aggregate demand is affected by a change in government expenditure. 
C) amount aggregate supply is affected by a change in government expenditure. 
D) amount private consumption is decreased by government expenditure. 
E) extent to which automatic stabilizers must be changed in order to avoid recessions. 
A) extra scrutiny government action receives. 
B) amount aggregate demand is affected by a change in government expenditure. 
C) amount aggregate supply is affected by a change in government expenditure. 
D) amount private consumption is decreased by government expenditure. 
E) extent to which automatic stabilizers must be changed in order to avoid recessions.

Question 15

If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP,then the appropriate monetary policy is one that ________ the federal funds rate and ________ aggregate demand.

Accepted Answer

A) raises;increases 
B) raises;decreases 
C) lowers;increases 
D) lowers;decreases 
E) raises;has no effect on 
A) raises;increases 
B) raises;decreases 
C) lowers;increases 
D) lowers;decreases 
E) raises;has no effect on

Question 16

An advantage monetary policy has over fiscal policy is that monetary policy

Accepted Answer

A) can be quickly changed and implemented. 
B) is coordinated with fiscal policy. 
C) is approved by the president of the United States. 
D) affects consumption expenditure and investment without impacting international trade. 
E) has no multiplier effects. 
A) can be quickly changed and implemented. 
B) is coordinated with fiscal policy. 
C) is approved by the president of the United States. 
D) affects consumption expenditure and investment without impacting international trade. 
E) has no multiplier effects.

Question 17

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

Accepted Answer

Starting in the early 1970s,the federal

Question 18

If the Fed's policies aim to increase aggregate demand,the Fed must fear

Accepted Answer

A) inflation. 
B) recession. 
C) stagflation. 
D) a supply shock that decreases potential GDP. 
E) a supply shock that increases aggregate supply. 
A) inflation. 
B) recession. 
C) stagflation. 
D) a supply shock that decreases potential GDP. 
E) a supply shock that increases aggregate supply.

Question 19

The government has a budget surplus if

Accepted Answer

A) there is no national debt. 
B) tax revenue is greater than outlays. 
C) government outlays are greater than tax revenue. 
D) the budget is balanced. 
E) a fiscal stimulus is being used to combat a recession. 
A) there is no national debt. 
B) tax revenue is greater than outlays. 
C) government outlays are greater than tax revenue. 
D) the budget is balanced. 
E) a fiscal stimulus is being used to combat a recession.

Question 20

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

Accepted Answer

The country had a balanced budget in 201

If the Fed lowers the federal funds rate,which of the following occurs?

The magnitude of the tax multiplier is ________ the magnitude of the government expenditure multiplier.

An economic expansion leads to needs-tested spending and induced taxes.

Explain four reasons why it is difficult to use discretionary fiscal policy to eliminate a deflationary or inflationary gap.

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

To eliminate a recessionary gap,what fiscal policy should the government pursue?

Suppose the economy is in an equilibrium in which real GDP is less than potential GDP.To increase real GDP,the government can use a fiscal stimulus of

If the economy is in an equilibrium with real GDP less than potential GDP,a fiscal stimulus could move the economy toward potential GDP by simultaneously taxes and government expenditures on goods and services.

What are automatic stabilizers? How do they help stabilize real GDP?

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP. -In the figure above,the gap is one trillion dollars.To close the gap,the government can government expenditure and/or taxes.

When the Fed the federal funds rate,the opportunity cost of firms' investment and so the quantity of investment .

If government expenditure on goods and services increase by $100 billion,then aggregate demand

If the Fed is concerned about a possible recession,it the federal funds rate,which the quantity of money and the amount of bank loans.

The government expenditure multiplier is used to determine the

If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP,then the appropriate monetary policy is one that the federal funds rate and aggregate demand.

An advantage monetary policy has over fiscal policy is that monetary policy

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

If the Fed's policies aim to increase aggregate demand,the Fed must fear

The government has a budget surplus if

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

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 Fed lowers the federal funds rate,which of the following occurs?

The magnitude of the tax multiplier is ________ the magnitude of the government expenditure multiplier.

An economic expansion leads to ________ needs-tested spending and ________ induced taxes.

Explain four reasons why it is difficult to use discretionary fiscal policy to eliminate a deflationary or inflationary gap.

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

To eliminate a recessionary gap,what fiscal policy should the government pursue?

Suppose the economy is in an equilibrium in which real GDP is less than potential GDP.To increase real GDP,the government can use a fiscal stimulus of

If the economy is in an equilibrium with real GDP less than potential GDP,a fiscal stimulus could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services.

What are automatic stabilizers? How do they help stabilize real GDP?

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP. -In the figure above,the ________ gap is one trillion dollars.To close the gap,the government can ________ government expenditure and/or ________ taxes.

When the Fed ________ the federal funds rate,the opportunity cost of firms' investment ________ and so the quantity of investment ________.

If government expenditure on goods and services increase by $100 billion,then aggregate demand

If the Fed is concerned about a possible recession,it ________ the federal funds rate,which ________ the quantity of money and ________ the amount of bank loans.

The government expenditure multiplier is used to determine the

If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP,then the appropriate monetary policy is one that ________ the federal funds rate and ________ aggregate demand.

An advantage monetary policy has over fiscal policy is that monetary policy

Discuss the federal budget history of the United States since 1970.Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

If the Fed's policies aim to increase aggregate demand,the Fed must fear

The government has a budget surplus if

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

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

An economic expansion leads to needs-tested spending and induced taxes.

If the economy is in an equilibrium with real GDP less than potential GDP,a fiscal stimulus could move the economy toward potential GDP by simultaneously taxes and government expenditures on goods and services.

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP. -In the figure above,the gap is one trillion dollars.To close the gap,the government can government expenditure and/or taxes.

When the Fed the federal funds rate,the opportunity cost of firms' investment and so the quantity of investment .

If the Fed is concerned about a possible recession,it the federal funds rate,which the quantity of money and the amount of bank loans.

If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP,then the appropriate monetary policy is one that the federal funds rate and aggregate demand.