Question 1

Increased government spending on unemployment insurance during a recession is an example of:

Accepted Answer

A)   an automatic stabilizer.
B)   discretionary fiscal policy.
C)   expansionary fiscal policy.
D)   contractionary fiscal policy.E) A) and B)
F) B) and C)

Question 2

A lack of understanding regarding the current state of the economy creates a(n)  _______ lag.

Accepted Answer

A)   information
B)   formulation
C)   implementation
D)   directionE) A) and B)
F) C) and D)

Question 3

The shortest-term securities sold by the U.S. are:

Accepted Answer

A)   Treasury bonds.
B)   Treasury notes.
C)   certificates of deposit.
D)   Treasury bills.E) All of the above
F) A) and D)

Question 4

A budget surplus is the:

Accepted Answer

A)   amount of money a government spends beyond the net revenue it brings in.
B)   amount of net revenue a government brings in beyond what it spends.
C)   total amount of money that a government owes to creditors.
D)   total amount of money that a government receives from a tax increase.E) A) and C)
F) A) and B)

Question 5

Government decisions about the level of taxation and public spending are called:

Accepted Answer

A)   fiscal policy.
B)   monetary policy.
C)   congressional policy.
D)   legislative budgeting policy.E) All of the above
F) A) and C)

Question 6

_______ are protected against inflation.

Accepted Answer

A)   Treasury bonds
B)   Treasury notes.
C)   TIPS
D)   Treasury billsE) All of the above
F) B) and D)

Question 7

The graph shown displays various economic outcomes.  If the economy is currently at equilibrium B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely:

Accepted Answer

A)   move to equilibrium A.
B)   remain at equilibrium B.
C)   move to equilibrium C.
D)   move to equilibrium D.E) B) and D)
F) None of the above

Question 8

If the government increases payments to dairy farmers for their excess supply:

Accepted Answer

A)   interest rates will decrease.
B)   aggregate demand will increase.
C)   contractionary fiscal policy will be enacted.
D)   None of these are true.E) B) and C)
F) A) and B)

Question 9

The graph shown displays various economic outcomes. 3 output with lower prices. B)  SRAS will shift to the left, and the economy will have Y 3 output at higher prices. C)  LRAS will shift to the left until equilibrium is reached. D)  AD will shift to the right, restoring long-run equilibrium." class="answers-bank-image d-inline" rel="preload" > If the economy is currently at equilibrium D, and the government does nothing, then eventually:

Accepted Answer

A)   SRAS will shift to the right, and the economy will have Y 3 output with lower prices.
B)   SRAS will shift to the left, and the economy will have Y 3 output at higher prices.
C)   LRAS will shift to the left until equilibrium is reached.
D)   AD will shift to the right, restoring long-run equilibrium.E) A) and C)
F) B) and C)

Question 10

If the government were to reduce spending on the school lunch program, it would be enacting:

Accepted Answer

A)   contractionary fiscal policy.
B)   expansionary fiscal policy.
C)   contractionary monetary policy.
D)   expansionary monetary policy.E) B) and C)
F) A) and C)

Question 11

After a devastating hurricane hits the Gulf Coast of Florida, Congress authorizes $50 billion in emergency spending to help families rebuild. Assuming the government already spends more than it makes in revenue, this plan will:

Accepted Answer

A)   increase the debt by $50 billion.
B)   increase the deficit by $50 billion.
C)   increase the debt and deficit by $50 billion each.
D)   increase the debt by $100 billion and the deficit by $50 billion.E) C) and D)
F) A) and D)

Question 12

Fiscal policy that the government chooses to adopt is called:

Accepted Answer

A)   an automatic stabilizer.
B)   discretionary fiscal policy.
C)   monetary policy.
D)   contractionary policy.E) None of the above
F) A) and B)

Question 13

Discretionary fiscal policy:

Accepted Answer

A)   can magnify the automatic stabilization effects of existing policies.
B)   only magnifies the automatic stabilizer effects of policies that stimulate the economy.
C)   often counters the effect of automatic stabilizers that already exist.
D)   None of these are true.E) A) and C)
F) B) and D)

Question 14

When the SRAS curve shifts to the left, the economy faces lower output and higher prices, otherwise known as stagflation. If the government then enacts expansionary fiscal policy, what will be the effect on the economy?

Accepted Answer

A)   Higher output and higher prices
B)   Higher output and lower prices
C)   Lower output and lower pricesD) A) and B)
E) All of the above

Question 15

When the government enacts fiscal policy:

Accepted Answer

A)   long-run potential output is always decreased.
B)   the intervention takes a long time to actually occur.
C)   the economy returns to its long-run equilibrium more quickly than it can correct itself.
D)   All of these are true.E) A) and D)
F) A) and C)

Question 16

If the government were to increase taxes, it would be enacting:

Accepted Answer

A)   contractionary fiscal policy.
B)   expansionary fiscal policy.
C)   contractionary monetary policy
D)   expansionary monetary policy.E) B) and C)
F) B) and D)

Question 17

Suppose the country of Piedmont borrows money to start a brand-new infrastructure program. GDP is currently $400 billion. The plan will take the public debt from $250 billion to $350 billion in ten years, when GDP is projected to be $425 billion. What is the projected debt in ten years as a percentage of GDP?

Accepted Answer

A)   59 percent
B)   62.5 percent
C)   70 percent
D)   82.4 percentE) B) and C)
F) None of the above

Question 18

Discretionary fiscal policy is:

Accepted Answer

A)   that which the government chooses to adopt.
B)   affected by taxes and government spending, without specific action from policymakers.
C)   that which the government enacts only for a short period of time.
D)   taxes and government spending Congress does not adopt.E) C) and D)
F) A) and B)

Question 19

The longest-term securities sold by the United States are:

Accepted Answer

A)   Treasury bonds.
B)   Treasury notes.
C)   certificates of deposit.
D)   Treasury bills.E) B) and C)
F) C) and D)

Question 20

The government can enact contractionary fiscal policy by:

Accepted Answer

A)   reducing its spending.
B)   decreasing personal income taxes.
C)   decreasing corporate income taxes.
D)   All of these are ways to enact contractionary fiscal policy.E) All of the above
F) C) and D)

Exam 13: Fiscalpolicy

If the government were to reduce spending on the school lunch program, it would be enacting:

Correct Answer
verified

The graph shown displays various economic outcomes. If the economy is currently at equilibrium B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely:

Correct Answer
verified

After a devastating hurricane hits the Gulf Coast of Florida, Congress authorizes $50 billion in emergency spending to help families rebuild. Assuming the government already spends more than it makes in revenue, this plan will:

Correct Answer
verified

The longest-term securities sold by the United States are:

Correct Answer
verified

Increased government spending on unemployment insurance during a recession is an example of:

Correct Answer
verified

Discretionary fiscal policy is:

Correct Answer
verified

A budget surplus is the:

Correct Answer
verified

If the government increases payments to dairy farmers for their excess supply:

Correct Answer
verified

A lack of understanding regarding the current state of the economy creates a(n) _______ lag.

Correct Answer
verified

The government can enact contractionary fiscal policy by:

Correct Answer
verified

Correct Answer
verified

The graph shown displays various economic outcomes. If the economy is currently at equilibrium D, and the government does nothing, then eventually:

Correct Answer
verified

_______ are protected against inflation.

Correct Answer
verified

Fiscal policy that the government chooses to adopt is called:

Correct Answer
verified

Government decisions about the level of taxation and public spending are called:

Correct Answer
verified

The shortest-term securities sold by the U.S. are:

Correct Answer
verified

Discretionary fiscal policy:

Correct Answer
verified

If the government were to increase taxes, it would be enacting:

Correct Answer
verified

When the SRAS curve shifts to the left, the economy faces lower output and higher prices, otherwise known as stagflation. If the government then enacts expansionary fiscal policy, what will be the effect on the economy?

Correct Answer
verified

When the government enacts fiscal policy:

Correct Answer
verified

Exam 13: Fiscalpolicy

If the government were to reduce spending on the school lunch program, it would be enacting:

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the economy is currently at equilibrium B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely:

Correct AnswerverifiedShow Answer

After a devastating hurricane hits the Gulf Coast of Florida, Congress authorizes $50 billion in emergency spending to help families rebuild. Assuming the government already spends more than it makes in revenue, this plan will:

Correct AnswerverifiedShow Answer

The longest-term securities sold by the United States are:

Correct AnswerverifiedShow Answer

Increased government spending on unemployment insurance during a recession is an example of:

Correct AnswerverifiedShow Answer

Discretionary fiscal policy is:

Correct AnswerverifiedShow Answer

A budget surplus is the:

Correct AnswerverifiedShow Answer

If the government increases payments to dairy farmers for their excess supply:

Correct AnswerverifiedShow Answer

A lack of understanding regarding the current state of the economy creates a(n) _______ lag.

Correct AnswerverifiedShow Answer

The government can enact contractionary fiscal policy by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the economy is currently at equilibrium D, and the government does nothing, then eventually:

Correct AnswerverifiedShow Answer

_______ are protected against inflation.

Correct AnswerverifiedShow Answer

Fiscal policy that the government chooses to adopt is called:

Correct AnswerverifiedShow Answer

Government decisions about the level of taxation and public spending are called:

Correct AnswerverifiedShow Answer

The shortest-term securities sold by the U.S. are:

Correct AnswerverifiedShow Answer

Discretionary fiscal policy:

Correct AnswerverifiedShow Answer

If the government were to increase taxes, it would be enacting:

Correct AnswerverifiedShow Answer

When the SRAS curve shifts to the left, the economy faces lower output and higher prices, otherwise known as stagflation. If the government then enacts expansionary fiscal policy, what will be the effect on the economy?

Correct AnswerverifiedShow Answer

When the government enacts fiscal policy:

Correct AnswerverifiedShow Answer

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