Question 1

A contractionary fiscal policy shifts the aggregate demand curve leftward.

Accepted Answer

A) True 
 B)False

Question 2

If government increases the size of its cyclically adjusted surplus, we can

Accepted Answer

A)  assume that government is causing interest rates to rise.
B)  not determine government's impact on the economy without also knowing the status of the actual budget.
C)  assume that government is having a contractionary effect on the economy.
D)  assume that government is having an expansionary effect on the economy.E) C) and D)
F) All of the above

Question 3

It is possible for an increase in government spending to encourage, instead of crowding out, private investment.

Accepted Answer

A) True 
 B)False

Question 4

Since actual budget deficits surpassed 10 percent of GDP in 2009,

Accepted Answer

A)  fiscal policy has become contractionary.
B)  the deficits as a percentage of GDP have fallen, but fiscal policy has remained expansionary.
C)  deficits as a percentage of GDP have continued to rise.
D)  deficits as a percentage of GDP have remained constant but risen in dollar amounts.E) None of the above
F) All of the above

Question 5

What percentage of the U.S.public debt is held by U.S.government agencies and the Federal Reserve (2015) ?

Accepted Answer

A)  26 percent
B)  50 percent
C)  41 percent
D)  34 percentE) B) and C)
F) All of the above

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 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)  low-interest-rate policy.E) B) and C)
F) C) and D)

Question 8

An increase in the cyclical deficits will automatically increase the cyclically adjusted budget deficit.

Accepted Answer

A) True 
 B)False

Question 9

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely

Accepted Answer

A)  crowd out future public investment.
B)  reduce the economy's future productive capacity.
C)  complement private investment.
D)  crowd out private investment.E) B) and C)
F) A) and B)

Question 10

One timing problem in using fiscal policy to counter a recession is the "operational 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 D)
F) B) and C)

Question 11

When current government expenditures exceed current tax revenues and the economy is achieving full employment,

Accepted Answer

A)  the cyclically adjusted budget has neither a deficit nor a surplus.
B)  the cyclically adjusted budget has a deficit.
C)  fiscal policy is contractionary.
D)  the cyclically adjusted budget has a surplus.E) C) and D)
F) B) and D)

Question 12

As of 2015, most of the U.S.federal debt was owed to

Accepted Answer

A)  Americans.
B)  foreign governments.
C)  the Chinese people.
D)  the Japanese people.E) C) and D)
F) A) and D)

Question 13

In 2015, the Federal Reserve and other U.S.(federal)  government agencies held about what percentage of U.S.federal debt?

Accepted Answer

A)  25 percent
B)  60 percent
C)  40 percent
D)  75 percentE) None of the above
F) All of the above

Question 14

An appropriate fiscal policy for severe demand-pull inflation is

Accepted Answer

A)  an increase in government spending.
B)  depreciation of the dollar.
C)  a reduction in interest rates.
D)  a tax rate increase.E) B) and C)
F) C) and D)

Question 15

Which of the following did not contribute directly to the Great Recession?

Accepted Answer

A)  crisis in the mortgage lending market
B)  bursting of the dot-com stock market bubble
C)  freezing credit markets
D)  pessimism originating from financial market turmoilE) A) and D)
F) All of the above

Question 16

The payment of interest on the public debt in the United States mildly increases income inequality.

Accepted Answer

A) True 
 B)False

Question 17

The so-called recognition lag associated with fiscal policy is a result of how slowly the U.S.Congress moves.

Accepted Answer

A) True 
 B)False

Question 18

An appropriate fiscal policy for a severe recession is

Accepted Answer

A)  a decrease in government spending.
B)  a decrease in tax rates.
C)  appreciation of the dollar.
D)  an increase in interest rates.E) A) and B)
F) All of the above

Question 19

The cyclically adjusted surplus in the U.S.went from +1.2 percent of GDP in 2000 to âˆ'1.2 percent of GDP in 2002.This suggests that the government during that period

Accepted Answer

A)  cut taxes and/or increased spending.
B)  increased taxes and/or cut spending.
C)  wanted to rein in inflation.
D)  did not change its discretionary fiscal policy.E) A) and B)
F) All of the above

Question 20

The economic burden of World War II for the United States was primarily

Accepted Answer

A)  shifted to future generations by bond financing.
B)  borne by the persons who lived during the war period.
C)  shifted to foreign nations who were defeated during the war.
D)  borne by the industries that produced military products during the war.E) C) and D)
F) None of the above

Exam 33: Fiscal Policy, Deficits, and Debt

The cyclically adjusted surplus in the U.S.went from +1.2 percent of GDP in 2000 to âˆ'1.2 percent of GDP in 2002.This suggests that the government during that period

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When current government expenditures exceed current tax revenues and the economy is achieving full employment,

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Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP.The government is engaging in a(n)

Correct AnswerverifiedShow Answer

In 2015, the Federal Reserve and other U.S.(federal) government agencies held about what percentage of U.S.federal debt?

Correct AnswerverifiedShow Answer

What percentage of the U.S.public debt is held by U.S.government agencies and the Federal Reserve (2015) ?

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An appropriate fiscal policy for severe demand-pull inflation is

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A contractionary fiscal policy shifts the aggregate demand curve leftward.

Correct AnswerverifiedShow Answer

An appropriate fiscal policy for a severe recession is

Correct AnswerverifiedShow Answer

Which of the following did not contribute directly to the Great Recession?

Correct AnswerverifiedShow Answer

The payment of interest on the public debt in the United States mildly increases income inequality.

Correct AnswerverifiedShow Answer

It is possible for an increase in government spending to encourage, instead of crowding out, private investment.

Correct AnswerverifiedShow Answer

The economic burden of World War II for the United States was primarily

Correct AnswerverifiedShow Answer

The so-called recognition lag associated with fiscal policy is a result of how slowly the U.S.Congress moves.

Correct AnswerverifiedShow Answer

As of 2015, most of the U.S.federal debt was owed to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the cyclical deficits will automatically increase the cyclically adjusted budget deficit.

Correct AnswerverifiedShow Answer

If government increases the size of its cyclically adjusted surplus, we can

Correct AnswerverifiedShow Answer

Since actual budget deficits surpassed 10 percent of GDP in 2009,

Correct AnswerverifiedShow Answer

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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