Question 1

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

Accepted Answer

A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending. 
A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending.

Question 2

Figure 18-1  
-Refer to Figure 18-1.Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.If contractionary policy is used to move the economy back to long run equilibrium,this would be depicted as a movement from ________ using the static AD-AS model in the figure above.

Accepted Answer

A) D to C 
B) C to B 
C) A to E 
D) B to A 
E) E to A 
A) D to C 
B) C to B 
C) A to E 
D) B to A 
E) E to A

Question 3

In Year 1 suppose the economy is at potential GDP and that the federal budget deficit equals $100 billion.In Year 2 the federal budget deficit rises to $150 billion,but the cyclically adjusted budget deficit falls to $75 billion.How can the actual budget deficit rise and the cyclically adjusted budget deficit fall?

Accepted Answer

The rise in the actual budget deficit wi

Question 4

If the economy is slipping into a recession,which of the following would be an appropriate fiscal policy?

Accepted Answer

A) an increase in the money supply and a decrease in interest rates 
B) a decrease in government purchases 
C) a decrease in taxes 
D) a decrease in oil prices 
A) an increase in the money supply and a decrease in interest rates 
B) a decrease in government purchases 
C) a decrease in taxes 
D) a decrease in oil prices

Question 5

Federal government purchases,as a percentage of GDP,

Accepted Answer

A) have risen since the early 1950s. 
B) have fallen since the early 1950s. 
C) have remained roughly the same since the early 1950s. 
D) rose from the early 1950s until the mid 1980s,and then fell. 
A) have risen since the early 1950s. 
B) have fallen since the early 1950s. 
C) have remained roughly the same since the early 1950s. 
D) rose from the early 1950s until the mid 1980s,and then fell.

Question 6

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

Accepted Answer

No,expansionary fiscal policy does not d

Question 7

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Accepted Answer

A) True 
 B)False

Question 8

Figure 18-1  
-Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E. 
A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E.

Question 9

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

Accepted Answer

A) the Federal Reserve can more quickly change monetary policy than the president and the Congress can change fiscal policy. 
B) the Federal Reserve can immediately recognize when real GDP is below or above potential GDP. 
C) changes in interest rates have a considerably larger effect on the economy than changes in government purchases or taxes. 
D) changes in interest rates have their full effect on the economy in a short period of time,whereas changes in government spending and taxes have their full effect over a long period of time. 
A) the Federal Reserve can more quickly change monetary policy than the president and the Congress can change fiscal policy. 
B) the Federal Reserve can immediately recognize when real GDP is below or above potential GDP. 
C) changes in interest rates have a considerably larger effect on the economy than changes in government purchases or taxes. 
D) changes in interest rates have their full effect on the economy in a short period of time,whereas changes in government spending and taxes have their full effect over a long period of time.

Question 10

An increase in government purchases will increase aggregate demand because

Accepted Answer

A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand. 
A) government expenditures are a component of aggregate demand. 
B) consumption expenditures are a component of aggregate demand. 
C) the decline in the price level will increase demand. 
D) the decline in the interest rate will increase demand.

Question 11

The majority of the federal government debt is held by government agencies.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Tax cuts on business income ________ aggregate demand.

Accepted Answer

A) would decrease 
B) would increase 
C) would not change 
D) may increase or decrease 
A) would decrease 
B) would increase 
C) would not change 
D) may increase or decrease

Question 14

An increase in the tax wedge associated with a given economic activity will decrease the level of that activity.

Accepted Answer

A) True 
 B)False

Question 15

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Accepted Answer

A) no 
B) partial 
C) complete 
D) more than complete 
A) no 
B) partial 
C) complete 
D) more than complete

Question 16

Before the Great Depression of the 1930s,the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________.

Accepted Answer

A) state and local levels;federal level 
B) local level;federal level 
C) federal level;state and local levels 
D) federal level;state level 
A) state and local levels;federal level 
B) local level;federal level 
C) federal level;state and local levels 
D) federal level;state level

Question 17

Crowding out refers to a decline in ________ as a result of an increase in ________.

Accepted Answer

A) tax revenues;unemployment 
B) government purchases;tax rates 
C) government purchases;private expenditures 
D) private expenditures;government purchases 
A) tax revenues;unemployment 
B) government purchases;tax rates 
C) government purchases;private expenditures 
D) private expenditures;government purchases

Question 18

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Accepted Answer

A) The Federal Reserve cut its target for the federal funds rate. 
B) There was an increase in government spending on defense and unemployment compensation. 
C) Taxpayers were given rebates on taxes they already paid. 
D) Income taxes were raised to reduce the federal budget deficit and reduce interest rates. 
A) The Federal Reserve cut its target for the federal funds rate. 
B) There was an increase in government spending on defense and unemployment compensation. 
C) Taxpayers were given rebates on taxes they already paid. 
D) Income taxes were raised to reduce the federal budget deficit and reduce interest rates.

Question 19

Show the impact of tax reduction and simplification using the dynamic aggregate demand and aggregate supply model.Clearly show and identify the impact of the tax change.Assume that aggregate demand and short-run aggregate supply shift as they typically do in the dynamic model.Show what happens to the price level and real GDP because of the tax change.

Accepted Answer

@#IMG-DLM& The economy's initial equilibrium is at

Question 20

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Accepted Answer

A) True 
 B)False

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

If the economy is slipping into a recession,which of the following would be an appropriate fiscal policy?

Federal government purchases,as a percentage of GDP,

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

An increase in government purchases will increase aggregate demand because

The majority of the federal government debt is held by government agencies.

Government transfer payments include which of the following?

Tax cuts on business income ________ aggregate demand.

An increase in the tax wedge associated with a given economic activity will decrease the level of that activity.

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Before the Great Depression of the 1930s,the majority of government spending took place at the and after the Great Depression the majority of government spending took place at the .

Crowding out refers to a decline in as a result of an increase in .

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 18: Fiscal Policy

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

If the economy is slipping into a recession,which of the following would be an appropriate fiscal policy?

Federal government purchases,as a percentage of GDP,

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

An increase in government purchases will increase aggregate demand because

The majority of the federal government debt is held by government agencies.

Government transfer payments include which of the following?

Tax cuts on business income ________ aggregate demand.

An increase in the tax wedge associated with a given economic activity will decrease the level of that activity.

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Before the Great Depression of the 1930s,the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________.

Crowding out refers to a decline in ________ as a result of an increase in ________.

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Before the Great Depression of the 1930s,the majority of government spending took place at the and after the Great Depression the majority of government spending took place at the .

Crowding out refers to a decline in as a result of an increase in .