question

Council of Economic Advisers.

answer

The group of three economists appointed by the President to provide fiscal policy recommendations is the:

question

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

answer

Council of Economic Advisers.

question

deficits during recessions and surpluses during periods of demand-pull inflation.

answer

Countercyclical discretionary fiscal policy calls for:

question

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

answer

Fiscal policy refers to the:

question

involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.

answer

Discretionary fiscal policy is so named because it:

question

is designed to expand real GDP.

answer

Expansionary fiscal policy is so named because it:

question

is aimed at reducing aggregate demand and thus achieving price stability.

answer

Contractionary fiscal policy is so named because it:

question

tax cuts during recession and reductions in government spending during inflation.

answer

An economist who favors smaller government would recommend:

question

increasing government spending by $4 billion.

answer

If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by:

question

decreasing taxes by $25 billion.

answer

If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:

question

increases in government spending during recession and tax increases during inflation.

answer

An economist who favored expanded government would recommend:

question

reducing government expenditures by $20 billion.

answer

If the MPS in an economy is .4, government could shift the aggregate demand curve leftward by $50 billion by:

question

increasing taxes by $20 billion.

answer

If the MPC in an economy is .75, government could shift the aggregate demand curve leftward by $60 billion by:

question

deficits are incurred during recessions and surpluses during inflations.

answer

Discretionary fiscal policy will stabilize the economy most when:

question

an increase in saving.

answer

The effect of a government surplus on the equilibrium level of GDP is substantially the same as:

question

an excess of government expenditures over tax receipts.

answer

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward:

question

Reductions in Federal tax rates on personal and corporate income.

answer

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

question

increase tax rates and/or reduce government spending.

answer

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price level stability under these conditions the government should:

question

reduce tax rates and/or increase government spending.

answer

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $200 billion. To obtain full employment under these conditions the government should:

question

a decrease in tax rates.

answer

An appropriate fiscal policy for a severe recession is:

question

a tax rate increase.

answer

An appropriate fiscal policy for severe demand-pull inflation is:

question

shift the AD curve to the left.

answer

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:

question

a $10 billion increase in government spending

answer

Which of the following represents the most expansionary fiscal policy?

question

leftward shift in the economy's aggregate demand curve.

answer

Which of the following represents the most contractionary fiscal policy?

question

rightward shift in the economy's aggregate demand curve.

answer

An expansionary fiscal policy is shown as a:

question

larger is the economy's MPC.

answer

A tax reduction of a specific amount will be more expansionary, the:

question

smaller is the economy's MPS.

answer

A specific reduction in government spending will dampen demand-pull inflation by a greater amount, the:

question

reduce taxes by $80 billion.

answer

Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly), government should:

question

increase government expenditures by $50 billion.

answer

Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $100 billion. To achieve full-employment output (exactly), government should:

question

increase government expenditures by $40 billion.

answer

Suppose the price level is fixed, the MPC is .8, the GDP gap is a negative $200 billion. To achieve full-employment output (exactly), government should:

question

with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

answer

Built-in stability means that:

question

economy would become more stable.

answer

If Congress adjusted the U.S. tax system so that the MPC was reduced, the

question

require no legislative action by Congress to be made effective.

answer

A major advantage of the built-in or automatic stabilizers is that they:

question

Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.

answer

Which of the following best describes the built-in stabilizers as they function in the United States?

question

Built-in stability only partially offsets fluctuations in economic activity.

answer

Which of the following statements is correct?

question

GDP: $0 100 200 300 400 Consumption: $8 88 168 248 320

answer

Answer the question on the basis of the following before-tax consumption schedule for a closed economy: GDP: $0 100 200 300 400 Consumption: $40 120 200 280 360 Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is now imposed in this economy, the consumption schedule will be:

question

is regressive

answer

Answer the question on the basis of the following before-tax consumption schedule for a closed economy: GDP: $0 100 200 300 400 Consumption: $40 120 200 280 360 Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, the tax system:

question

.8 both before and after taxes.

answer

Answer the question on the basis of the following before-tax consumption schedule for a closed economy: GDP: $0 100 200 300 400 Consumption: $40 120 200 280 360 Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, the marginal propensity to consume is:

question

neither increases nor decreases built-in stability.

answer

Answer the question on the basis of the following before-tax consumption schedule for a closed economy: GDP: $0 100 200 300 400 Consumption: $40 120 200 280 360 Refer to the above data. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, we can conclude that the tax:

question

GDP: $100 200 300 400 500 Consumption: $134 188 242 296 350

answer

(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: GDP: $100 200 300 400 500 Consumption: $140 200 260 320 380 Refer to the above data. If a 10 percent proportional tax on income is imposed, the consumption schedule will now be:

question

both consumption and saving to increase by smaller and smaller absolute amounts as GDP rises.

answer

(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: GDP: $100 200 300 400 500 Consumption: $140 200 260 320 380 Refer to the above data. The 10 percent proportional tax on income would cause:

question

reduce the size of the multiplier and make the economy more stable.

answer

(Advanced analysis) Answer the question on the basis of the following before-tax consumption schedule for an economy: GDP: $100 200 300 400 500 Consumption: $140 200 260 320 380 Refer to the above data. A 10 percent proportional tax on income would:

question

the size of the Federal government's budgetary surplus or deficit when the economy is operating at full employment.

answer

The cyclically-adjusted budget refers to:

question

what the size of the Federal budget deficit or surplus would be if the economy was at full employment.

answer

The cyclically-adjusted budget tells us:

question

The cyclically-adjusted budget is less likely to show a deficit than is the actual budget.

answer

Which of the following statements is correct?

question

tax revenues would exceed government expenditures if full employment were achieved.

answer

If the economy has a cyclically-adjusted budget surplus, this means that:

question

cannot be determined whether the government engaged in expansionary or contractionary fiscal policy in 2009.

answer

The actual budget deficit of the Federal government in 2009 was about $1.4 trillion. On the basis of this information it:

question

the cyclically-adjusted budget has neither a deficit nor a surplus.

answer

When current government expenditures equal current tax revenues and the economy is achieving full employment:

question

the cyclically-adjusted budget has a deficit.

answer

When current government expenditures exceed current tax revenues and the economy is achieving full employment:

question

the cyclically-adjusted budget has a surplus.

answer

When current tax revenues exceed current government expenditures and the economy is achieving full employment:

question

contractionary fiscal policy.

answer

Suppose the government purposely changes the economy's cyclically-adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n):

question

expansionary fiscal policy.

answer

Suppose the government purposely changes the economy's cyclically-adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP. The government is engaging in a(n):

question

neutral fiscal policy.

answer

Suppose the government cuts taxes to keep the economy's cyclically-adjusted budget in balance when the economy is expanding. The government is engaging in a(n):

question

a recession.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above data for a fictional economy. The changes in the budget conditions between 1998 and 1999 best reflect:

question

an expansionary fiscal policy.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above data for a fictional economy. The changes in the budget conditions between 1999 and 2000 best reflect:

question

a recession.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above table for a fictional economy. The changes in the budget conditions between 2000 and 2001 best reflect:

question

an expansionary fiscal policy.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above data for a fictional economy. The changes in the budget conditions between 1999 and 2000 best reflect:

question

an expansion of real GDP and an automatic increase in tax revenues.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above table for a fictional economy. The changes in the budget conditions between 2000 and 2001 best reflect:

question

contractionary fiscal policy.

answer

Year: Actual Budget: Adjusted budget: 1998 0 0 1999 -3 0 2000 -5 -2 2001 -2 -2 2002 +2 +1 Refer to the above table for a fictional economy. The changes in the budget conditions between 2001 and 2002 best reflect a(n):

question

increase the cyclically-adjusted deficit but reduce the actual deficit.

answer

An effective expansionary fiscal policy will:

question

cyclically-adjusted deficit.

answer

Economists refer to a budget deficit that exists when the economy is achieving full employment as a:

question

the actual and the cyclically-adjusted budgets will be equal.

answer

When the economy is at full employment:

question

assume that government is having a contractionary effect on the economy.

answer

If government increases the size of its cyclically-adjusted surplus, we can:

question

subtracting government tax revenues from government spending in a particular year.

answer

The Federal budget deficit is found by:

question

budget deficit.

answer

The amount by which government expenditures exceed revenues during a particular year is the:

question

budget surplus.

answer

The amount by which Federal tax revenues exceed Federal government expenditures during a particular year is the:

question

large Federal budget deficits.

answer

Since 2002, the United States has had:

question

Fiscal policy swung from contractionary to expansionary in 2002.

answer

Which of the following is a true statement?

question

the recession of 2001.

answer

The immediate primary cause of the swing from Federal budget surpluses in 2000 and 2001 to a budget deficit in 2002 was:

question

Bursting of the Dot.Com stock market bubble.

answer

Which of the following did not contribute directly to the Great Recession?

question

implemented a $787 billion package of tax cuts and government expenditure increases.

answer

The American Recovery and Reinvestment Act of 2009:

question

rose to -7.3 percent of potential GDP in 2009.

answer

The cyclically-adjusted budget deficit for the United States:

question

stimulate aggregate demand and employment.

answer

The American Recovery and Reinvestment Act of 2009 was implemented primarily to:

question

primarily by a combination of recession and expansionary fiscal policy.

answer

Increases in the Federal budget deficit from 2007 to 2009 were caused:

question

5.

answer

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The operational lag of fiscal policy is reflected in event(s):

question

1 and 2.

answer

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The recognition lag of fiscal policy is reflected in events:

question

3 and 4

answer

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession; (2) Economists reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congress and signed by the President; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the above information. The administrative lag of fiscal policy is reflected in events:

question

Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.

answer

Which of the following best describes the idea of a political business cycle?

question

politicians will manipulate the economy to enhance their chances of being reelected.

answer

The political business cycle refers to the possibility that:

question

increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.

answer

The crowding-out effect of expansionary fiscal policy suggests that:

question

government spending increases at the expense of private investment.

answer

The crowding-out effect of expansionary fiscal policy suggests that:

question

the crowding-out effect.

answer

The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes:

question

strongest when the economy is at full employment.

answer

The crowding-out effect is:

question

An increase in government spending on infrastructure that increases private sector productivity.

answer

Which of the following fiscal policy actions is most likely to increase aggregate supply?

question

consists of the historical accumulation of all past Federal deficits and surpluses.

answer

The U.S. public debt:

question

the Federal government owes to holders of U.S. securities.

answer

The public debt is the amount of money that:

question

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

answer

The public debt is held as:

question

$460 billion.

answer

Security: Amount: Treasury Bills $220 Corporate Bonds 140 Treasury Notes 80 Corporate stock 200 US savings bonds 60 treasury bonds 100 The public debt for the above economy is:

question

increase the public debt from $460 billion to $480 billion.

answer

Other things equal, an increase of Treasury bonds from $100 billion to $120 billion in the above economy would:

question

not change the size of the public debt.

answer

Other things equal, an increase of corporate bonds from $140 billion to $150 billion in the above economy would:

question

increased by $20 billion.

answer

Suppose the Federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have:

question

decreased by $150 billion.

answer

Suppose the Federal government had budget surpluses of $80 billion in year 1 and $120 billion in year 2 but had budget deficits of $10 billion in year 3 and $40 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have:

question

demand-pull inflation

answer

Which of the following is not a significant contributor to the U.S. public debt?

question

reducing national income and therefore tax revenues.

answer

Recessions have contributed to the public debt by:

question

There is a tendency for the public debt to grow during recessions.

answer

Which of the following statements is correct?

question

about a third as large as the GDP.

answer

In 2009, the U.S. Federal debt held by the public was:

question

interest on the debt as a percentage of the GDP.

answer

The average tax rate required to service the public debt is roughly measured by:

question

$11.9 trillion.

answer

In 2009, the U.S. public debt was about:

question

43 percent.

answer

What percentage of the U.S. public debt is held by Federal agencies and the Federal Reserve?

question

29 percent

answer

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions?

question

larger than the portion held by Federal Agencies and the Federal Reserve.

answer

The portion of the public debt held outside Federal agencies and the Federal Reserve is:

question

the U.S. public (individuals, businesses, financial institutions, etc.) and state and local governments.

answer

The largest proportion of the U.S. public debt is held by:

question

29

answer

In 2009, about ____ percent of the U.S. public debt was held by people and institutions abroad.

question

43

answer

In 2009, about ____ percent of the U.S. public debt was held by the Federal government and Federal Reserve.

question

the bulk of the public debt is owned by U.S. citizens and institutions.

answer

To say that "the U.S. public debt is mostly held internally" is to say that:

question

is thought to increase income inequality.

answer

Payment of interest on the U.S. public debt:

question

reducing the current level of investment.

answer

The most likely way the public debt burdens future generations, if at all, is by:

question

is financed by borrowing.

answer

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending:

question

government borrowing to finance the public debt increases the real interest rate and reduces private investment.

answer

The crowding-out effect suggests that:

question

crowding-out effect.

answer

The Federal government has a large public debt that it finances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This illustrates the:

question

may be very small or conceivably zero when the economy is in a severe depression.

answer

The real burden of an increase in the public debt:

question

an increase in public investment

answer

Which one of the following might offset a crowding-out effect of financing a large public debt?

question

construction of highways

answer

Which of the following is the best example of public investment?

question

Bankruptcy of the Federal government

answer

Which of the following is not considered a legitimate concern of a large public debt?

question

Crowding-out of private investment

answer

Which of the following is considered a legitimate concern of a large public debt?

question

7.6

answer

(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008?

question

5:1; 2:1

answer

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ______; by 2040 it is projected to be _________.

question

Restricting immigration of skilled working-age adults.

answer

(Last Word) Which of the following would not help to relieve the Social Security and Medicare shortfalls?

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