question

A group of three economists appointed by the president to provide fiscal policy recommendations is the:

answer

Council of Economic Advisers

question

Discretionary fiscal policy refers to:

answer

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

question

Countercyclical discretionary fiscal policy calls for:

answer

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

question

Fiscal policy refers to the:

answer

deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level

question

Expansionary fiscal policy is so named because it:

answer

is designed to expand real GDP

question

Contractionary fiscal policy is so named because it:

answer

is aimed at reducing aggregate demand and thus achieving price stability

question

An economist who favors smaller government would recommend:

answer

tax cuts during recession and tax cuts during inflation

question

An economist who favored expanded government would recommend:

answer

increases in government spending during recession and tax increases during inflation

question

Discretionary fiscal policy will stabilize the economy most when:

answer

deficits are incurred during recessions and surpluses during inflations

question

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:

answer

an excess of government expenditures over tax receipts

question

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?

answer

reductions in federal tax rates on personal and corporate income

question

Which of the following represents the most expansionary fiscal policy?

answer

a $10 billion increase in government spending

question

Which of the following represents the most contractionary fiscal policy?

answer

a $30 billion decrease in government spending

question

A contractionary fiscal policy is shown as a:

answer

leftward shift in the economy's aggregate demand curve

question

An expansionary fiscal policy is shown as a:

answer

rightward shift in the economy's aggregate demand curve

question

Built-in stability means that:

answer

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 in a deficit or a lower budget surplus

question

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

answer

require no legislative action by Congress to be made effective

question

Which of the following best describes the built-in stabilizers as they function in the U.S.?

answer

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

question

The cyclically adjusted budget tells us:

answer

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

question

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

answer

the cyclically adjusted budget has a deficit

question

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

answer

the cyclically adjusted budget has a surplus

question

An effective expansionary fiscal policy will:

answer

increase the cyclically adjusted deficit but reduce the actual deficit

question

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

answer

cyclically adjusted budget

question

The federal budget deficit is found by:

answer

subtracting government tax revenues from government spending in a particular year

question

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

answer

budget deficit

question

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

answer

budget surplus

question

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

answer

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

question

The political business cycle refers to the possibility that:

answer

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

question

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

answer

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

question

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

answer

the crowding-out effect

question

The U.S. public debt:

answer

consists of the historical accumulation of all past federal deficits and surpluses

question

The public debt is the amount of money that:

answer

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

question

The public debt is held as:

answer

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

question

Recessions have contributed to the public debt by:

answer

reducing national income and therefore tax revenues

question

In 2002, the U.S. federal debt held by the public was:

answer

about 70% of the size of the GDP

question

In 2012, the U.S. public debt was about:

answer

$16.4 billion

question

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

answer

40%

question

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

answer

33%

question

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

answer

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

question

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:

answer

crowding-out effect

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