question

Expansionary fiscal policy is so-named because it involves an expansion of the nation's money supply

answer

False

question

Fiscal policy is complicated by political considerations and political motivations.

answer

True

question

As measured by the standardized budget, the U.S. government engaged in a contractionary fiscal policy in 2002 and 2003.

answer

True

question

Built-in stability is synonymous with discretionary fiscal policy

answer

False

question

An increase in the cyclical deficits will automatically increase the standardized budget deficit

answer

False

question

The additional taxes needed to pay the interest on the public debt reduce incentives to work, save, invest, and bear risks

answer

True

question

A decrease in government spending is one of the options that can be used to pursue a contractionary fiscal policy

answer

True

question

The crowding-out effect occurs when an expansionary fiscal policy increases the interest rate, decreases investment spending, and weakens fiscal policy

answer

True

question

A contractionary fiscal policy shifts the aggregate demand curve leftward

answer

True

question

Fiscal policy is mainly undertaken by the Federal Reserve

answer

False

question

The payment of interest on the public debt probably decreases income inequality

answer

False

question

Financing wartime expenditures by increasing internally held public debt permits a nation to defer a part of the economic cost of war

answer

False

question

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the Federal government

answer

True

question

Tax revenues automatically increase during economic expansions and decrease during recessions

answer

True

question

Permanent tax reductions are more likely to be expansionary than temporary tax reductions

answer

True

question

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions

answer

True

question

Between 1994 and 2000, annual budget deficits gave way to annual budget surpluses

answer

True

question

Demand-pull inflation can be restrained by increasing government spending and reducing taxes

answer

False

question

If taxation becomes more progressive, the built-in stability in the economy will increase

answer

True

question

The concept of a "political business cycle" suggests that a possible cause of macroeconomic instability is due to the use of fiscal policy for political purposes

answer

True

question

The crowding-out effect of the public debt may be dampened if the investment-demand curve is shifting to the right

answer

True

question

The per capita public debt doubled between 1990 and 2000

answer

False

question

The public debt is the accumulation of all deficits and surpluses that have occurred through time

answer

True

question

The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds

answer

True

question

The actual and standardized budgets will be equal when the economy is at full employment

answer

True

question

The crowding-out effect refers to the possibility that deficit spending may motivate people to increase their saving in anticipation of higher future taxes

answer

False

question

If the MPC in the economy is .75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion

answer

True

question

Half of the public debt is owned by foreign individuals and institutions

answer

False

question

The public debt as a percent of GDP is lower in the United States than in many other industrial nations

answer

True

question

If government spending that gives rise to a budget deficit is for public investment projects, such as highways, then this spending can increase the economy's future production capacity

answer

True

question

A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other

answer

False

question

An increase in taxes would be an expansionary fiscal policy

answer

False

question

The financing of the public debt can increase interest rates and reduce private investment spending

answer

True

question

Built-in stability refers to the fact that net tax revenues vary inversely with the level of GDP

answer

False

question

The Council of Economic Advisors was established to give economic advice and assistance to the U.S. President

answer

True

question

If there is a Federal budget surplus, then government revenues are greater than its expenditures

answer

True

question

A large public debt will not bankrupt the Federal government because it can refinance the debt or increase taxes to pay it

answer

True

question

State and local governments' fiscal policies typically reinforce the fiscal policy of the Federal government to counter recession and inflation

answer

False

question

Discretionary fiscal policy is independent of Congress and based on the progressivity of the tax system

answer

False

question

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms

answer

True

question

The operational lag of fiscal policy refers to the time that elapses between the beginning of a recession or inflation and the certain awareness that it is actually happening

answer

False

question

An increase in taxes and a decrease in government spending would be characteristic of a contractionary fiscal policy

answer

True

question

Most of the public debt can be considered a public credit

answer

True

question

The standardized budget measures what the Federal budget deficit or surplus would be at full employment output with existing tax and spending decisions

answer

True

ECON Ch. 30 True/False – Flashcards

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