Question 1

The concept of a "political business cycle" implies a misuse of ﬁscal policy making it a source of
economic instability.

Accepted Answer

A) True 
 B)False

Question 2

The effect of contractionary ﬁscal policy is shown as a

Accepted Answer

A)   rightward shift in the economy's aggregate demand curve.
B)   rightward shift in the economy's aggregate supply curve.
C)   movement along an existing aggregate demand curve.
D)   leftward shift in the economy's aggregate demand curve.E) B) and C)
F) A) and C)

Question 3

A budget surplus means that

Accepted Answer

A)   government expenditures are greater than revenues in a given year.
B)   government revenues are greater than expenditures in a given year.
C)   a nation's exports are greater than its imports.
D)   a nation's imports are greater than its exports.E) None of the above
F) A) and D)

Question 4

Suppose the price level is ﬁxed, the MPC is 0.8, and the GDP gap is a negative $200 billion. To achieve full-employment output (exactly) , government should

Accepted Answer

A)   increase government expenditures by $200 billion.
B)   reduce taxes by $200 billion.
C)   increase government expenditures by $40 billion.
D)   reduce taxes by $160 billion.E) C) and D)
F) B) and D)

Question 5

The amount by which government expenditures exceed revenues during a particular year is the

Accepted Answer

A)   public debt.
B)   budget deﬁcit.
C)   full employment.
D)   GDP gap.E) C) and D)
F) B) and D)

Question 6

The United States has experienced both budget surpluses and deﬁcits since 2000.

Accepted Answer

A) True 
 B)False

Question 7

Expansionary ﬁscal policy is so named because it involves an expansion of the nation's money supply.

Accepted Answer

A) True 
 B)False

Question 8

The most likely way the public debt burdens future generations, if at all, is by

Accepted Answer

A)   reducing the current level of investment.
B)   causing future unemployment.
C)   causing deﬂation.
D)   reducing real interest rates.E) A) and B)
F) None of the above

Question 9

Can the large public debt cause the nation to go bankrupt? Explain.

Accepted Answer

The two reasons that the public debt wil...

Question 10

The largest proportion of the U.S. public debt is held by

Accepted Answer

A)   the U.S. public (individuals, businesses, ﬁnancial institutions, and government) .
B)   foreign individuals and institutions.
C)   the Federal Reserve System.
D)   U.S. government agencies.E) C) and D)
F) A) and B)

Question 11

Security  Amount (in Billions)   Treasury Bills $220 Corporate Bonds 140 Treasury Notes 80 Corporate Stock 200 US Savings Bonds 60 Treasury Bonds 100\begin{array} { | l | c | } \hline 	ext { Security } & 	ext { Amount (in Billions)  } \\hline 	ext { Treasury Bills } & \$ 220 \\hline 	ext { Corporate Bonds } & 140 \\hline 	ext { Treasury Notes } & 80 \\hline 	ext { Corporate Stock } & 200 \\hline 	ext { US Savings Bonds } & 60 \\hline 	ext { Treasury Bonds } & 100 \\hline\end{array} Security  Treasury Bills  Corporate Bonds  Treasury Notes  Corporate Stock  US Savings Bonds  Treasury Bonds ​ Amount (in Billions)  $2201408020060100​​  The public debt for the economy is

Accepted Answer

A)   $540 billion.
B)   $400 billion.
C)   $580 billion.
D)   $460 billion. E) All of the above
F) B) and C)

Question 12

Year  Actual Budget Deficit (-)  or  Surplus (+)   Cyclically Adjusted Deficit (-)  or Surplus (+) 1+1.4%+0.1%2+2.5+1.13+1.3+1.14−1.5−1.15−3.4−2.76−3.5−2.47−2.6−1.88−1.9−1.89−1.3−1.4\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Actual Budget Deficit (-)  or } \\text { Surplus (+)  }\end{array} & \begin{array} { c } \text { Cyclically Adjusted Deficit (-)  or Surplus } \( + ) \end{array} \\hline 1 & + 1.4 \% & + 0.1 \% \\hline 2 & + 2.5 & + 1.1 \\hline 3 & + 1.3 & + 1.1 \\hline 4 & - 1.5 & - 1.1 \\hline 5 & - 3.4 & - 2.7 \\hline 6 & - 3.5 & - 2.4 \\hline 7 & - 2.6 & - 1.8 \\hline 8 & - 1.9 & - 1.8 \\hline 9 & - 1.3 & - 1.4 \\hline\end{array} Year 123456789​ Actual Budget Deficit (-)  or  Surplus (+)  ​+1.4%+2.5+1.3−1.5−3.4−3.5−2.6−1.9−1.3​ Cyclically Adjusted Deficit (-)  or Surplus (+) ​+0.1%+1.1+1.1−1.1−2.7−2.4−1.8−1.8−1.4​​  Refer to the data in the table. The direction of ?scal policy became more expansionary from

Accepted Answer

A)   Year 1 to 2.
B)   Year 6 to 7.
C)   Year 4 to 5.
D)   Year 5 to 6. E) C) and D)
F) A) and C)

Question 13

Contractionary ﬁscal policy would tend to make a budget deﬁcit become

Accepted Answer

A)   bigger.
B)   smaller.
C)   a trade deﬁcit.
D)   a trade surplus.E) All of the above
F) A) and C)

Question 14

If you were told that the government had an actual budget deﬁcit of $50 billion, then you would

Accepted Answer

A)   know that ﬁscal policy was expansionary.
B)   know that ﬁscal policy was contractionary.
C)   know that ﬁscal policy was producing a cyclical deﬁcit.
D)   not be able to determine the direction of ﬁscal policy from the information given.E) None of the above
F) A) and C)

Question 15

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inﬂation. If the MPS is 0.25, then it could

Accepted Answer

A)   increase taxes by $16 billion.
B)   increase taxes by $24 billion.
C)   decrease government spending by $10 billion.
D)   decrease government spending by $16 billion.E) B) and D)
F) A) and D)

Question 16

The operational lag of ﬁscal policy refers to the time that elapses between the beginning of a recession
or inﬂation and the certain awareness that it is actually happening.

Accepted Answer

A) True 
 B)False

Question 17

The total amount of debt owed by the federal government is represented by the total value of the outstanding

Accepted Answer

A)   U.S. government securities.
B)   Federal Reserve notes.
C)   bank loans and deposits.
D)   stocks and bonds.E) B) and C)
F) A) and B)

Question 18

Recessions have contributed to the public debt by

Accepted Answer

A)   reducing national income and therefore tax revenues.
B)   increasing real interest rates.
C)   increasing the international value of the dollar.
D)   increasing national saving.E) None of the above
F) All of the above

Question 19

Tax revenues automatically increase during economic expansions and decrease during recessions.

Accepted Answer

A) True 
 B)False

Question 20

The United States has experienced both budget surpluses and deﬁcits since 2000.

Accepted Answer

A) True 
 B)False

Exam 13: Fiscal Policy, Deficits, and Debt

Correct Answer
verified

Can the large public debt cause the nation to go bankrupt? Explain.

Correct Answer
verified
The two reasons that the public debt wil...
View Answer

The amount by which government expenditures exceed revenues during a particular year is the

Correct Answer
verified

The operational lag of ﬁscal policy refers to the time that elapses between the beginning of a recession or inﬂation and the certain awareness that it is actually happening.

Correct Answer
verified

Suppose the price level is ﬁxed, the MPC is 0.8, and the GDP gap is a negative $200 billion. To achieve full-employment output (exactly) , government should

Correct Answer
verified

Tax revenues automatically increase during economic expansions and decrease during recessions.

Correct Answer
verified

The United States has experienced both budget surpluses and deﬁcits since 2000.

Correct Answer
verified

The largest proportion of the U.S. public debt is held by

Correct Answer
verified

Expansionary ﬁscal policy is so named because it involves an expansion of the nation's money supply.

Correct Answer
verified

A budget surplus means that

Correct Answer
verified

Recessions have contributed to the public debt by

Correct Answer
verified

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inﬂation. If the MPS is 0.25, then it could

Correct Answer
verified

The most likely way the public debt burdens future generations, if at all, is by

Correct Answer
verified

The effect of contractionary ﬁscal policy is shown as a

Correct Answer
verified

The concept of a "political business cycle" implies a misuse of ﬁscal policy making it a source of economic instability.

Correct Answer
verified

Contractionary ﬁscal policy would tend to make a budget deﬁcit become

Correct Answer
verified

The total amount of debt owed by the federal government is represented by the total value of the outstanding

Correct Answer
verified

If you were told that the government had an actual budget deﬁcit of $50 billion, then you would

Correct Answer
verified

The United States has experienced both budget surpluses and deﬁcits since 2000.

Correct Answer
verified

Correct Answer
verified

Exam 13: Fiscal Policy, Deficits, and Debt

Correct AnswerverifiedShow Answer

Can the large public debt cause the nation to go bankrupt? Explain.

Correct AnswerverifiedThe two reasons that the public debt wil...View AnswerShow Answer

The amount by which government expenditures exceed revenues during a particular year is the

Correct AnswerverifiedShow Answer

The operational lag of ﬁscal policy refers to the time that elapses between the beginning of a recession or inﬂation and the certain awareness that it is actually happening.

Correct AnswerverifiedShow Answer

Suppose the price level is ﬁxed, the MPC is 0.8, and the GDP gap is a negative $200 billion. To achieve full-employment output (exactly) , government should

Correct AnswerverifiedShow Answer

Tax revenues automatically increase during economic expansions and decrease during recessions.

Correct AnswerverifiedShow Answer

The United States has experienced both budget surpluses and deﬁcits since 2000.

Correct AnswerverifiedShow Answer

The largest proportion of the U.S. public debt is held by

Correct AnswerverifiedShow Answer

Expansionary ﬁscal policy is so named because it involves an expansion of the nation's money supply.

Correct AnswerverifiedShow Answer

A budget surplus means that

Correct AnswerverifiedShow Answer

Recessions have contributed to the public debt by

Correct AnswerverifiedShow Answer

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inﬂation. If the MPS is 0.25, then it could

Correct AnswerverifiedShow Answer

The most likely way the public debt burdens future generations, if at all, is by

Correct AnswerverifiedShow Answer

The effect of contractionary ﬁscal policy is shown as a

Correct AnswerverifiedShow Answer

The concept of a "political business cycle" implies a misuse of ﬁscal policy making it a source of economic instability.

Correct AnswerverifiedShow Answer

Contractionary ﬁscal policy would tend to make a budget deﬁcit become

Correct AnswerverifiedShow Answer

The total amount of debt owed by the federal government is represented by the total value of the outstanding

Correct AnswerverifiedShow Answer

If you were told that the government had an actual budget deﬁcit of $50 billion, then you would

Correct AnswerverifiedShow Answer

The United States has experienced both budget surpluses and deﬁcits since 2000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The two reasons that the public debt wil...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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