Question 1

Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt

Accepted Answer

A)   crowds out private investment.
B)   does not impose a large burden on future generations.
C)   has a procyclical economic effect on the economy.
D)   can result in the bankruptcy of the Federal government.E) All of the above
F) None of the above

Question 2

The federal budget deﬁcit is found by

Accepted Answer

A)   subtracting government tax revenues plus government borrowing from government spending in a particular year.
B)   subtracting government tax revenues from government spending in a particular year.
C)   cumulating the differences between government spending and tax revenues over all years since the nation's founding.
D)   subtracting government revenues from the noninvestment-type government spending in a particular year.E) A) and C)
F) None of the above

Question 3

Which of the following best describes the built-in stabilizers as they function in the United States?

Accepted Answer

A)   The size of the multiplier varies inversely with the level of GDP.
B)   Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises.
C)   Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP.
D)   Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.E) A) and C)
F) C) and D)

Question 4

An economy is experiencing a high rate of inﬂation. The government wants to reduce consumption by $36 billion to reduce inﬂationary pressure. The MPC is 0.75. By how much should the government raise
Taxes to achieve its objective?

Accepted Answer

A)   $6 billion
B)   $9 billion
C)   $12 billion
D)   $16 billionE) A) and B)
F) None of the above

Question 5

Fiscal policy refers to

Accepted Answer

A)   deliberate changes in government spending and taxes to promote economic growth, full employment, and price level stability.
B)   deliberate changes in government spending and taxes to achieve greater equality in the distribution of income.
C)   altering of the interest rate to change aggregate demand.
D)   fact that equal increases in government spending and taxation will be contractionary.E) A) and B)
F) A) and C)

Question 6

Accepted Answer

A)    AD0\mathrm { AD } _ { 0 }AD0​ 
B)    AD1. A D _ { 1 } 	ext {. }AD1​.  
C)    AD2\mathrm { AD } _ { 2 }AD2​ 
D)    AD3\mathrm { AD } _ { 3 }AD3​E) A) and D)
F) B) and C)

Question 7

A speciﬁc reduction in government spending will dampen demand-pull inﬂation by a greater amount the

Accepted Answer

A)   smaller is the economy's MPC.
B)   ﬂatter is the economy's aggregate supply curve.
C)   smaller is the economy's MPS.
D)   less is the economy's built-in stability.E) All of the above
F) A) and C)

Question 8

The goal of expansionary ﬁscal policy is to rein in inﬂation.

Accepted Answer

A) True 
 B)False

Question 9

If the government wants to reduce unemployment using ﬁscal policy, it may do so by increasing
government spending.

Accepted Answer

A) True 
 B)False

Question 10

The American Recovery and Reinvestment Act of 2009 is a clear example of

Accepted Answer

A)   nondiscretionary ﬁscal policy that made the cyclically adjusted budget become more positive.
B)   nondiscretionary ﬁscal policy that made the cyclically adjusted budget become more negative.
C)   discretionary ﬁscal policy that made the cyclically adjusted budget become more positive.
D)   discretionary ﬁscal policy that made the cyclically adjusted budget become more negative.E) A) and C)
F) All of the above

Question 11

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $300 billion, the
Cyclical deﬁcit is

Accepted Answer

A)   $30 billion.
B)   $20 billion.
C)   $10 billion.
D)   $50 billion.E) None of the above
F) A) and B)

Question 12

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n)

Accepted Answer

A)   expansionary ﬁscal policy.
B)   contractionary ﬁscal policy.
C)   neutral ﬁscal policy.
D)   high-interest-rate policy.E) All of the above
F) None of the above

Question 13

One timing problem in using ﬁscal policy to counter a recession is the "recognition lag" that occurs between the

Accepted Answer

A)   start of the recession and the time it takes to recognize that the recession has started.
B)   start of a predicted recession and the actual start of the recession.
C)   time ﬁscal action is taken and the time that the action has its effect on the economy.
D)   time the need for the ﬁscal action is recognized and the time that the action is taken.E) A) and C)
F) B) and C)

Question 14

Suppose the government cuts taxes to keep the economy's cyclically adjusted budget in balance when the economy is expanding. The government is engaging in a(n)

Accepted Answer

A)   contractionary ﬁscal policy.
B)   expansionary ﬁscal policy.
C)   low-interest-rate policy.
D)   neutral ﬁscal policy.E) A) and B)
F) B) and C)

Question 15

One advantage of automatic ﬁscal policy over discretionary ﬁscal policy is that automatic ﬁscal policy

Accepted Answer

A)   makes the actual budget a better reﬂection of the condition of the economy than the standardized budget.
B)   does not produce a cyclical deﬁcit, as discretionary policy does.
C)   is not subject to the timing problems of discretionary policy.
D)   has a greater multiplier effect than discretionary policy.E) A) and D)
F) C) and D)

Question 16

In 2018, the U.S. public debt was about

Accepted Answer

A)   $21.5 trillion.
B)   $16.4 trillion.
C)   $15.3 trillion.
D)   $11.9 trillion.E) None of the above
F) A) and B)

Question 17

Without a change in discretionary ﬁscal policy, we would expect that if the economy goes into recession, then the

Accepted Answer

A)   cyclically adjusted deﬁcit and the actual deﬁcit would both increase.
B)   cyclically adjusted deﬁcit and the actual deﬁcit would both decrease.
C)   cyclically adjusted deﬁcit would stay the same while the actual deﬁcit would increase.
D)   cyclically adjusted deﬁcit would increase while the actual deﬁcit would stay the same.E) All of the above
F) A) and B)

Question 18

Government  Spending  Tax Revenues  GDP  Year 1 $450$425$2,000 Year 2 5004503,000 Year 3 6005004,000 Year 4 6406205,000 Year 5 6805804,800 Year 6 6006205,000\begin{array} { | c | c | c | c | } \hline & \begin{array} { c } 	ext { Government } \	ext { Spending }\end{array} & 	ext { Tax Revenues } & 	ext { GDP } \\hline 	ext { Year 1 } & \$ 450 & \$ 425 & \$ 2,000 \\hline 	ext { Year 2 } & 500 & 450 & 3,000 \\hline 	ext { Year 3 } & 600 & 500 & 4,000 \\hline 	ext { Year 4 } & 640 & 620 & 5,000 \\hline 	ext { Year 5 } & 680 & 580 & 4,800 \\hline 	ext { Year 6 } & 600 & 620 & 5,000 \\hline\end{array} Year 1  Year 2  Year 3  Year 4  Year 5  Year 6 ​ Government  Spending ​$450500600640680600​ Tax Revenues $425450500620580620​ GDP $2,0003,0004,0005,0004,8005,000​​  The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. If year 1 is the ?rst year of this nation's existence and
Year 6 is the present year, this nation's public debt is

Accepted Answer

A)   $275 billion.
B)   $100 billion.
C)   $3,540 billion.
D)   $230 billion. E) A) and D)
F) A) and C)

Question 19

The political business cycle refers to the possibility that

Accepted Answer

A)   incumbent politicians will be reelected regardless of the state of the economy.
B)   politicians will manipulate the economy to enhance their chances of being reelected.
C)   there is more inﬂation during Democratic administrations than during Republican administrations.
D)   recessions coincide with election years.E) C) and D)
F) B) and D)

Question 20

eGovernment  Spending  Tax Revenues  GDP  Year 1 $800$825$4,000 Year 2 8508504,200 Year 3 9008754,350 Year 4 9509004,500 Year 5 1,0009254,600\begin{array} { | c | c | c | c | } \hline & \begin{array} { c } 	ext { eGovernment } \	ext { Spending }\end{array} & 	ext { Tax Revenues } & 	ext { GDP } \\hline 	ext { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \\hline 	ext { Year 2 } & 850 & 850 & 4,200 \\hline 	ext { Year 3 } & 900 & 875 & 4,350 \\hline 	ext { Year 4 } & 950 & 900 & 4,500 \\hline 	ext { Year 5 } & 1,000 & 925 & 4,600 \\hline\end{array} Year 1  Year 2  Year 3  Year 4  Year 5 ​ eGovernment  Spending ​$8008509009501,000​ Tax Revenues $825850875900925​ GDP $4,0004,2004,3504,5004,600​​  The table contains budget information for a hypothetical economy. All data are in billions of dollars. Assume that Year 1 is the ?rst year for this economy and Year 5 is the current year. What is the public
Debt in this economy at Year 5?

Accepted Answer

A)   $25 billion
B)   $75 billion
C)   $125 billion
D)   $925 billion E) A) and C)
F) B) and C)

Exam 13: Fiscal Policy, Deficits, and Debt

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n)

Correct Answer
verified

One timing problem in using ﬁscal policy to counter a recession is the "recognition lag" that occurs between the

Correct Answer
verified

$A) \mathrm { AD } _ { 0 } B) A D _ { 1 } \text {. } C) \mathrm { AD } _ { 2 } D) \mathrm { AD } _ { 3 }$

Correct Answer
verified

The federal budget deﬁcit is found by

Correct Answer
verified

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $300 billion, the Cyclical deﬁcit is

Correct Answer
verified

Correct Answer
verified

Which of the following best describes the built-in stabilizers as they function in the United States?

Correct Answer
verified

If the government wants to reduce unemployment using ﬁscal policy, it may do so by increasing government spending.

Correct Answer
verified

Correct Answer
verified

One advantage of automatic ﬁscal policy over discretionary ﬁscal policy is that automatic ﬁscal policy

Correct Answer
verified

Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt

Correct Answer
verified

An economy is experiencing a high rate of inﬂation. The government wants to reduce consumption by $36 billion to reduce inﬂationary pressure. The MPC is 0.75. By how much should the government raise Taxes to achieve its objective?

Correct Answer
verified

The goal of expansionary ﬁscal policy is to rein in inﬂation.

Correct Answer
verified

The American Recovery and Reinvestment Act of 2009 is a clear example of

Correct Answer
verified

Fiscal policy refers to

Correct Answer
verified

Suppose the government cuts taxes to keep the economy's cyclically adjusted budget in balance when the economy is expanding. The government is engaging in a(n)

Correct Answer
verified

The political business cycle refers to the possibility that

Correct Answer
verified

In 2018, the U.S. public debt was about

Correct Answer
verified

Without a change in discretionary ﬁscal policy, we would expect that if the economy goes into recession, then the

Correct Answer
verified

A speciﬁc reduction in government spending will dampen demand-pull inﬂation by a greater amount the

Correct Answer
verified

Exam 13: Fiscal Policy, Deficits, and Debt

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n)

Correct AnswerverifiedShow Answer

One timing problem in using ﬁscal policy to counter a recession is the "recognition lag" that occurs between the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The federal budget deﬁcit is found by

Correct AnswerverifiedShow Answer

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $300 billion, the Cyclical deﬁcit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best describes the built-in stabilizers as they function in the United States?

Correct AnswerverifiedShow Answer

If the government wants to reduce unemployment using ﬁscal policy, it may do so by increasing government spending.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One advantage of automatic ﬁscal policy over discretionary ﬁscal policy is that automatic ﬁscal policy

Correct AnswerverifiedShow Answer

Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt

Correct AnswerverifiedShow Answer

An economy is experiencing a high rate of inﬂation. The government wants to reduce consumption by $36 billion to reduce inﬂationary pressure. The MPC is 0.75. By how much should the government raise Taxes to achieve its objective?

Correct AnswerverifiedShow Answer

The goal of expansionary ﬁscal policy is to rein in inﬂation.

Correct AnswerverifiedShow Answer

The American Recovery and Reinvestment Act of 2009 is a clear example of

Correct AnswerverifiedShow Answer

Fiscal policy refers to

Correct AnswerverifiedShow Answer

Suppose the government cuts taxes to keep the economy's cyclically adjusted budget in balance when the economy is expanding. The government is engaging in a(n)

Correct AnswerverifiedShow Answer

The political business cycle refers to the possibility that

Correct AnswerverifiedShow Answer

In 2018, the U.S. public debt was about

Correct AnswerverifiedShow Answer

Without a change in discretionary ﬁscal policy, we would expect that if the economy goes into recession, then the

Correct AnswerverifiedShow Answer

A speciﬁc reduction in government spending will dampen demand-pull inﬂation by a greater amount the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified