Lesson 9 – Flashcards

In this example of a Keynesian driven recovery, the economy was initially stuck in recession with total unemployment of __________ million people. -zero -five -ten -fifteen

The political business cycle is the use of __________ policy to influence political groups and secure votes. -physical -monetary -fiscal -none of the above

Inflation or recession conditions automatically trigger some ___________________ changes in government (G) spending (i.e., without Congressional action). -discretionary -non-discretionary -pseudo-executive -psuedo-judicial

Assuming no change in taxes, an increase in government spending (G) of $100 billion with an MPC of 0.80 will add a total of $_____________ billion to the economy after the multiplier effect. -80 -100 -200 -500

Assuming no change in government spending, an increase in taxes of $80 billion with an MPC of 0.50 will subtract a total of $_____________ billion from the economy after the multiplier effect. -80 -400 -200 -500

________ based economies typically have higher tax rates than market-based economies because their governments provide more goods and services such as nationalized medical care. -Capitalist -Tradition -David Ricardo -Socialist

The Laffer curve shows the relationship between tax rates and ____________ and depicts the benefits of cutting taxes when tax rates are too high. -government spending -deficits -surpluses -tax revenues

Decreases in G will decrease the economy's GDP by causing a(n) ________ in the AD. -leakage and right shift -leakage and left shift -injection and left shift -injection and right shift

Through _________ policy, government is capable of counterbalancing recession or inflation to some extent, but there will be some uncertainties and risks. -physical -fiscal -environmental -foreign

If MPC is 0.8, then the simple multiplier is __________ . -10 -5 -4 -2

Increases in T will reduce the economy's GDP by causing a(n) ________ in the AD. -leakage and left shift -leakage and right shift -injection and left shift -injection and right shift

The reasoning behind increasing tax revenues from __________ tax rates is that people work harder and more effectively when they can keep more of their income. -increased -decreased -higher -none of the above

Changes in Government spending (G) will have a _________ impact upon the economy than changes in T because Government spending goes directly into the economy. -larger -smaller -lessened -none of the above

If a deficit increased from -$100 billion to -$400 billion, fiscal policy would be considered __________. -expansionary -contractionary -tightening -all the above

About ______ percent of the American public debt is held outside the United States. -85 -75 -55 -33

After World War II ___________ Theory became the accepted norm in the U.S. and this encouraged government to assume an active role in managing the economy. -Free Market (Adam Smith) -Command (Socialism) -Traditional (using local customs) -Keynesian (using G and T)

Critics of active fiscal policy argue that when funds are borrowed to finance a deficit, those savings could have been used in the private sector, thereby ____________ private expansion in favor of the public sector. -stimulating -crowding out -crowding in -none of the above

There is often a moderate amount of ___________ with fiscal policy because many variables can be changing at one time. -risk and uncertainty -sweet taste -sour taste -sweet and sour

Unemployment benefits, welfare, and some subsidies automatically ___________ in an inflationary economy. -stay the same -increase -decrease -none of the above

Future generations will normally ________ excessive burdens of debt shifted to them because of economic growth. -have -not have -always have -none of the above

Increases in G will increase the economy's GDP by causing a(n) ________ in the AD. -leakage and left shift -leakage and right shift -injection and right shift -injection and left shift

Political leaders may propose _______ policy to aid their own political interest by promoting the upside of the business cycle to coincide with an election. -fiscal -monetary -physical -none of the above

The amount of a decrease in T _______ all go to an increase in Consumption spending because of the MPC effect. -does -does not -does always -none of the above

In this example of a Keynesian driven recovery, the economy was initially stuck in recession with cyclical unemployment of __________ million people. -zero -five -ten -fifteen

If MPC is 0.75, then the simple multiplier is __________ . -10 -5 -4 -2

Recently China and Japan together owned over $2.5 trillion (a bit less than _____ %) of the American national debt. -80 -50 -30 -14

Active (discretionary) fiscal policy has _______ critics. -no -very few -many -none of the above

The amount of deficit or surplus in the government budget is also very dependent upon ___________________ in the economy, not just actions of government. -growth or recession -equity -efficiency -none of the above

Decreases in T will increase the economy's GDP by causing a(n) ________ in the AD. -leakage and left shift -leakage and right shift -injection and left shift -injection and right shift

The _____________ reduce inflationary pressure when expansions are too large and reduce recessionary pressures when contraction is excessive. -automatic stabilizers -manually operated stabilizers -semi-automatic switch -none of the above

Assuming no change in government spending, an increase in taxes of $100 billion with an MPC of 0.90 will subtract a total of $_____________ billion from the economy after the multiplier effect. -80 -400 -200 -900

Conservatives prefer to ____________ to stimulate the economy during a recessionary gap (less than full employment and output). -increase T -increase G -decrease T -decrease G

Keynes argued that government investment may actually ________ business investment during a recession. -depress -crowd in -crowd out -none of the above

The Swedish net tax revenue as a percent of GDP is about 50 percent while that for the United States is about _______ percent. -25 -50 -75 -10

Nondiscretionary fiscal policy or built-in stabilizers automatically _____________ government spending (G) during recessions. -decrease -increase -keep steady the -none of the above

The basic applications of fiscal policy relates to ___________ Theory. -Monetarist -Classical -Keynesian -None of the above

Assuming no change in taxes, an increase in government spending (G) of $100 billion with an MPC of 0.50 will add a total of $_____________ billion to the economy after the multiplier effect. -80 -100 -200 -500

If MPC is 0.5, then the simple multiplier is __________ . -10 -5 -4 -2

The Employment Act of 1946 required the President to deliver an annual report to Congress on the state of the economy and make recommendations for maintaining economic _________ and growth. -equity -inefficiency -stability -all of the above

One of the potential benefits of the borrowing that creates national debt is the ___________ that it can create if the money is invested wisely in public projects. -inflation (excessive right shift in AD) -economic growth (expanding PPF) -deflation (excessive left shift in AD) -none of the above

When tax rates are too high, a decrease in tax rates will cause a(n) _____________ in the tax revenue. -increase -decrease -slide -none of the above

Fiscal policy is termed ___________ when there is a deficit (spending exceeds tax revenues). -contractionary -tight -expansionary -neutral

Assuming no change in taxes, an increase in government spending (G) of $80 billion with an MPC of 0.90 will add a total of $_____________ billion to the economy after the multiplier effect. -800 -100 -200 -500

American taxes as a percent of total gross domestic product are __________ when compared to many European nations. -relatively large -about the same -relatively small -excessively large

Unemployment benefits, welfare, and some subsidies automatically ___________ in a recession. -stay the same -increase -decrease -none of the above

The total public debt is about $18 trillion for the United States ... _________ our GDP on a percentage basis . -quite a bit less than -a little bit more than -a great deal more than -none of the above

Assuming no change in government spending, an increase in taxes of $100 billion with an MPC of 0.80 will subtract a total of $_____________ billion from the economy after the multiplier effect. -80 -400 -200 -500

If MPC is 0.9, then the simple multiplier is __________ . -10 -5 -4 -2

By ______________ government expenditures (G) before an election, the economy may expand artificially aiding those already in power. -decreasing -cutting -eliminating -none of the above

By ______________ taxes (T) before an election, the economy may expand artificially aiding those already in power. -decreasing -cutting -eliminating some -all of the above

During ___________ recessions, taxes in dollar terms have been quite strongly decreased for upper income taxpayers and moderately decreased for other tax payers. -all past -recent -1800's -1700's

Nondiscretionary fiscal policy or built-in stabilizers automatically _____________ government spending (G) during inflations. -decrease -increase -keep steady the -none of the above

___________ is the total of the deficits still financed by government borrowing since the beginning of the nation in 1776. -American Express -Master Card -Visa -Public Debt

Interest payments to American individuals initially remain _______ the "Circular Flow" of the U.S. economy. -outside -within -beyond -none of the above

The theory of fiscal policy and fiscal policy applications evolved after the depression of the 1930's toward _______ government intervention into the economy. -less -more -keeping the same amount of -none of the above

The range of a business cycle is reduced substantially through the actions of the __________________. -automatic stabilizers -manually operated stabilizers -semi-automatic switch -none of the above

If a deficit decreases from -$400 billion to -$100 billion, fiscal policy is considered to be ___________ . -expansionary -contractionary -neutral -all the above

When government uses public debt to expand the economy, the funds must be borrowed and interest must be paid to the owners of the __________. -preferred stock -CD's -common stock -bonds

The __________ curve was the rationale for an effective 25 percent decrease in tax rates during the Reagan Administration of the 1980's. -Aggregate Demand -Production Possibilities -Aggregate Supply -Laffer

The Employment Act of 1946 was passed by Congress for government to accept _________ responsibility for promoting full employment and price stability. -no -some -total -none of the above