Essentials of Economics (Schiller) – Chapter 16

question

1. Alternating periods of economic growth and contraction are referred to as: A) Fiscal policy. B) The business cycle. C) A policy lever. D) The fiscal cycle. 2. Fiscal policy includes: A) The discount rate. C) Changes in government spending. B) Education and job training. D) All of the above. 3. Which of the following is an example of fiscal policy? A) Economic Recovery Tax Act of 1981. B) Balanced Budget Act and Taxpayers Relief Act of 1997. C) Gramm-Rudman-Hollings Act of 1985. D) All of the above. 4. Fiscal policy is determined by: A) The President. B) Congress through government expenditures. C) Congress through the tax laws. D) All of the above. 5. Fiscal policy levers include: A) Immigration policy. C) The reserve requirement. B) Changes in government spending. D) All of the above. 6. According to Keynes, a decrease in government expenditure shifts the aggregate: A) Supply curve to the left. C) Demand curve to the left. B) Supply curve to the right. D) Demand curve to the right. 7. Ceteris paribus, when income rises federal tax revenues: A) Decrease as taxpayers experience unemployment. B) Decrease since income taxes are regressive. C) Increase because automatic stabilizers work against the cyclical movements of GDP. D) Increase because Congress typically raises the tax rates during an expansion. 8. The key decision-maker for monetary policy in the U.S. is: A) The Board of Governors of the Federal Reserve System. B) Congress through government expenditures. C) Congress through the tax laws. D) The President of the United States. 9. The tools of monetary policy include: A) Open-market operations. C) Changes in the discount rate. B) Changes in the reserve requirement. D) All of the above. 10. When Federal Reserve Board Chairman Alan Greenspan announced a goal of “zero inflation,” which of the following policies was most consistent with his new goal? A) A lower discount rate. B) A lower minimum reserve ratio. C) The sale of securities in the open market. D) The purchase of securities in the open market. 11. Monetarists believe that an increase in the money supply shifts the aggregate: A) Supply curve to the left. C) Demand curve to the left. B) Supply curve to the right. D) Demand curve to the right. 12. The basic money supply is composed of: A) Currency only. B) Transactions accounts primarily. C) Credit card balances primarily. D) Only the portion of the money supply backed by gold. 13. Expansionary monetary or fiscal policy will definitely result in greater output and more inflation, ceteris paribus, if the aggregate: A) Supply curve is horizontal. B) Supply curve is upward sloping but not vertical. C) Supply curve is vertical. D) Demand curve is vertical. 14. Tools for supply-side policy include: A) Changes in tax incentives. C) Changes in government spending. B) Open-market operations. D) Changes in the discount rate. 15. Supply-side policy is designed to: A) Move the economy from a point inside the production-possibilities curve to a point on it and shift the aggregate supply curve to the left. B) Move the economy from a point inside the production-possibilities curve to a point on it and shift the aggregate supply curve to the right. C) Shift the production-possibilities curve outward and shift the aggregate supply curve to the left. D) Shift the production-possibilities curve outward and shift the aggregate supply curve to the right. 16. Which of the following shifts is consistent with deflation and a recession, ceteris paribus? A) A leftward shift of the aggregate supply curve. B) A rightward shift of the aggregate supply curve. C) A leftward shift of the aggregate demand curve. D) A rightward shift of the aggregate demand curve. 17. A fiscal policy cure for inflation includes: A) Patience. B) An increase in the reserve requirement. C) A reduction in tax rates for corporations and households. D) A decrease in government spending. 18. The occurrence of both high inflation and high unemployment at the same time is called: A) Extreme inflation. B) Stagflation. C) Deflation. D) Depression. 19. Fine-tuning of the economy does not work because of: A) Political constraints. C) Design problems. B) Measurement problems. D) All of the above. 20. The idea that no one knows for certain the shape of the aggregate supply curve contributes to: A) Goal conflicts. C) Design problems. B) Measurement problems. D) Implementation problems.
answer

1. B 2. C 3. D 4. D 5. B 6. C 7. C 8. A 9. D 10. C 11. D 12. B 13. B 14. A 15. D 16. C 17. D 18. B 19. D 20. C
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