Chapter 13 HW Qs Essay

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A group of three economists appointed by the president to provide fiscal policy recommendations is the:
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Council of Economic Advisers
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Discretionary fiscal policy refers to:
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intentional changes in taxes and government expenditures made by Congress to stabilize the economy.
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Countercyclical discretionary fiscal policy calls for:
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deficits during recessions and surpluses during periods of demand-pull inflation
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Fiscal policy refers to the:
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deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level
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Expansionary fiscal policy is so named because it:
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is designed to expand real GDP
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Contractionary fiscal policy is so named because it:
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is aimed at reducing aggregate demand and thus achieving price stability
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An economist who favors smaller government would recommend:
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tax cuts during recession and tax cuts during inflation
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An economist who favored expanded government would recommend:
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increases in government spending during recession and tax increases during inflation
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Discretionary fiscal policy will stabilize the economy most when:
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deficits are incurred during recessions and surpluses during inflations
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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:
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an excess of government expenditures over tax receipts
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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?
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reductions in federal tax rates on personal and corporate income
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Which of the following represents the most expansionary fiscal policy?
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a $10 billion increase in government spending
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Which of the following represents the most contractionary fiscal policy?
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a $30 billion decrease in government spending
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A contractionary fiscal policy is shown as a:
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leftward shift in the economy’s aggregate demand curve
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An expansionary fiscal policy is shown as a:
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rightward shift in the economy’s aggregate demand curve
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Built-in stability means that:
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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
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A major advantage of the built-in or automatic stabilize is that they:
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require no legislative action by Congress to be made effective
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Which of the following best describes the built-in stabilizers as they function in the U.S.?
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personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises
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The cyclically adjusted budget tells us:
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what the size of the federal budget deficit or surplus would be if the economy was at full employment
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When occurring government expenditures exceed current tax revenues and the economy is achieving full employment:
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the cyclically adjusted budget has a deficit
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When current tax revenues exceed government expenditures and the economy is achieving full employment:
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the cyclically adjusted budget has a surplus
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An effective expansionary fiscal policy will:
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increase the cyclically adjusted deficit but reduce the actual deficit
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Economists refer to a budget deficit that exists when the economy is achieving full employment as a:
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cyclically adjusted budget
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The federal budget deficit is found by:
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subtracting government tax revenues from government spending in a particular year
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The amount by which government expenditures exceed revenues during a particular year is the:
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budget deficit
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The amount by which federal tax revenues exceed federal government expenditures during a particular year is the:
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budget surplus
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Which of the following best describes the idea of a political business cycle:
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politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections
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The political business cycle refers to the possibility that:
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politicians will manipulate the economy to enhance their chances of being reelected
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The crowding-out effect of expansionary fiscal policy suggests that:
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increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment
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The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes:
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the crowding-out effect
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The U.S. public debt:
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consists of the historical accumulation of all past federal deficits and surpluses
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The public debt is the amount of money that:
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the federal government owes to holders of U.S. securities
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The public debt is held as:
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Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds
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Recessions have contributed to the public debt by:
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reducing national income and therefore tax revenues
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In 2002, the U.S. federal debt held by the public was:
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about 70% of the size of the GDP
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In 2012, the U.S. public debt was about:
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$16.4 billion
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What percentage of the U.S. public debt is held by federal agencies and the Federal Reserve?
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40%
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Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions?
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33%
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To say that “the U.S. public debt is mostly held internally” is to say that:
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the bulk of the public debt is owned by U.S. citizens and institutions
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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:
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crowding-out effect

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