Question 1

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

Accepted Answer

A)   Federal Reserve.
B)   budget deficit.
C)   budget surplus.
D)   public debt.E) None of the above
F) All of the above

Question 2

Assume the economy is at full employment and that investment spending declines dramatically.If the goal is to restore full employment,government fiscal policy should be directed toward:

Accepted Answer

A)   an equality of tax receipts and government expenditures.
B)   an excess of tax receipts over government expenditures.
C)   an excess of government expenditures over tax receipts.
D)   a reduction of subsidies and transfer payments and an increase in tax rates.E) A) and C)
F) None of the above

Question 3

Answer the question on the basis of the following before-tax consumption schedule for a closed economy:   Gross Domestic  Product (GDP)  ‾ Consumption (C) ‾0$40100120200200300280400360\begin{array}{l}	ext { Gross Domestic }\\begin{array} { c c c } \underline{	ext { Product (GDP)  }} &\underline{  	ext { Consumption (C) } } \0 & \$ 40 \100 & 120 \200 & 200 \300 & 280 \400 & 360\end{array}\end{array} Gross Domestic  Product (GDP)  ​0100200300400​ Consumption (C) ​$40120200280360​​  Refer to the data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is now imposed in this economy,the consumption schedule will be:

Accepted Answer

A)    GDP ‾ C ‾$0$810088200168300248400320\begin{array} { l } \underline { 	ext { GDP } } &\underline{	ext { C }} \\$0&\$8\100&88 \200&168 \300 & 248\400&320 \\end{array} GDP ​$0100200300400​ C ​$888168248320​ 
B)    GDP ‾ C ‾$0$010088200168300240400320\begin{array} { l } \underline { 	ext { GDP } } &\underline{	ext { C }} \\$0&\$0\100&88 \200&168 \300 & 240\400&320 \\end{array} GDP ​$0100200300400​ C ​$088168240320​ 
C)    GDP ‾ C ‾$0$1010090200170300250400310\begin{array} { l } \underline { 	ext { GDP } } &\underline{	ext { C }} \\$0&\$10\100&90 \200&170 \300 & 250\400&310 \\end{array} GDP ​$0100200300400​ C ​$1090170250310​ 
D)    GDP ‾ C ‾$0$010060200120300180400240\begin{array} { l } \underline { 	ext { GDP } } &\underline{	ext { C }} \\$0&\$0\100&60 \200&120 \300 &180\400&240\\end{array} GDP ​$0100200300400​ C ​$060120180240​   E) A) and C)
F) All of the above

Question 4

Which of the following statements is correct?

Accepted Answer

A)   Built-in stability only partially offsets fluctuations in economic activity.
B)   Built-in stability works in halting inflation,but it cannot alleviate unemployment.
C)   Built-in stability can be relied on to eliminate completely any fluctuation in economic activity.
D)   Built-in stability has eliminated the need for discretionary fiscal policy.E) B) and C)
F) A) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not considered a legitimate concern of a large public debt?

Accepted Answer

A)   Bankruptcy of the federal government.
B)   Disincentives created by higher taxes.
C)   Crowding-out of private investment.
D)   Increased income inequality.E) B) and C)
F) C) and D)

Question 7

The cyclically adjusted budget refers to:

Accepted Answer

A)   the inflationary impact that the automatic stabilizers have in a full-employment economy.
B)   that portion of a full-employment GDP that is not consumed in the year it is produced.
C)   the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment.
D)   the number of workers who are underemployed when the level of unemployment is 4 to 5 percent.E) A) and C)
F) A) and D)

Question 8

The crowding-out effect refers to the possibility that deficit spending may motivate people to increase their saving in anticipation of higher future taxes.

Accepted Answer

A) True 
 B)False

Question 9

Discretionary fiscal policy is so named because it:

Accepted Answer

A)   is undertaken at the option of the nation's central bank.
B)   occurs automatically as the nation's level of GDP changes.
C)   involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.
D)   is invoked secretly by the Council of Economic Advisers.E) C) and D)
F) A) and B)

Question 10

In an aggregate demand-aggregate supply diagram,equal decreases in government spending and taxes will:

Accepted Answer

A)   shift the AD curve to the right.
B)   increase the equilibrium GDP.
C)   not affect the AD curve.
D)   shift the AD curve to the left.E) None of the above
F) B) and C)

Question 11

In 2012,about ____ percent of the U.S.public debt was held by people and institutions abroad.

Accepted Answer

A)   43
B)   18
C)   29
D)   33E) All of the above
F) A) and B)

Question 12

Which of the following best describes the idea of a political business cycle?

Accepted Answer

A)   Politicians are more willing to cut taxes and increase government spending than they are to do the reverse.
B)   Fiscal policy will result in alternating budget deficits and surpluses.
C)   Politicians will use fiscal policy to cause output,real incomes,and employment to be rising prior to elections.
D)   Despite good intentions,various timing lags will cause fiscal policy to reinforce the business cycle.E) A) and B)
F) A) and C)

Question 13

A 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) A) and D)
F) A) and B)

Question 14

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information,it:

Accepted Answer

A)   can be concluded that the economy was faced with serious inflation in 2009.
B)   cannot be determined whether the government engaged in expansionary or contractionary fiscal policy in 2009.
C)   can be concluded that fiscal policy was contractionary in 2009.
D)   can be concluded that fiscal policy was expansionary in 2009.E) B) and C)
F) A) and D)

Question 15

What percentage of the U.S.public debt is held by federal agencies and the Federal Reserve?

Accepted Answer

A)   71 percent.
B)   50 percent.
C)   40 percent.
D)   29 percent.E) B) and C)
F) A) and B)

Question 16

An economist who favors smaller government would recommend:

Accepted Answer

A)   tax cuts during recession and reductions in government spending during inflation.
B)   tax increases during recession and tax cuts during inflation.
C)   tax cuts during recession and tax increases during inflation.
D)   increases in government spending during recession and tax increases during inflation.E) All of the above
F) A) and D)

Question 17

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the federal government.

Accepted Answer

A) True 
 B)False

Question 18

When current government expenditures equal 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 may have either a deficit or a surplus.
C)   fiscal policy is contractionary.
D)   nominal GDP and real GDP are equal.E) C) and D)
F) B) and C)

Question 19

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) None of the above
F) A) and B)

Question 20

The public debt is held as Treasury bills,Treasury notes,Treasury bonds,and U.S.savings bonds.

Accepted Answer

A) True 
 B)False

Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

A contractionary fiscal policy is shown as a:

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Discretionary fiscal policy is so named because it:

Correct Answer
verified

Which of the following is not considered a legitimate concern of a large public debt?

Correct Answer
verified

Assume the economy is at full employment and that investment spending declines dramatically.If the goal is to restore full employment,government fiscal policy should be directed toward:

Correct Answer
verified

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the federal government.

Correct Answer
verified

In an aggregate demand-aggregate supply diagram,equal decreases in government spending and taxes will:

Correct Answer
verified

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

Correct Answer
verified

Which of the following best describes the idea of a political business cycle?

Correct Answer
verified

Correct Answer
verified

The public debt is held as Treasury bills,Treasury notes,Treasury bonds,and U.S.savings bonds.

Correct Answer
verified

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

Correct Answer
verified

What percentage of the U.S.public debt is held by federal agencies and the Federal Reserve?

Correct Answer
verified

When current government expenditures equal current tax revenues and the economy is achieving full employment:

Correct Answer
verified

In 2012,about ____ percent of the U.S.public debt was held by people and institutions abroad.

Correct Answer
verified

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

Correct Answer
verified

The crowding-out effect refers to the possibility that deficit spending may motivate people to increase their saving in anticipation of higher future taxes.

Correct Answer
verified

An economist who favors smaller government would recommend:

Correct Answer
verified

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information,it:

Correct Answer
verified

The cyclically adjusted budget refers to:

Correct Answer
verified

Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

A contractionary fiscal policy is shown as a:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Discretionary fiscal policy is so named because it:

Correct AnswerverifiedShow Answer

Which of the following is not considered a legitimate concern of a large public debt?

Correct AnswerverifiedShow Answer

Assume the economy is at full employment and that investment spending declines dramatically.If the goal is to restore full employment,government fiscal policy should be directed toward:

Correct AnswerverifiedShow Answer

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the federal government.

Correct AnswerverifiedShow Answer

In an aggregate demand-aggregate supply diagram,equal decreases in government spending and taxes will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following best describes the idea of a political business cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The public debt is held as Treasury bills,Treasury notes,Treasury bonds,and U.S.savings bonds.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What percentage of the U.S.public debt is held by federal agencies and the Federal Reserve?

Correct AnswerverifiedShow Answer

When current government expenditures equal current tax revenues and the economy is achieving full employment:

Correct AnswerverifiedShow Answer

In 2012,about ____ percent of the U.S.public debt was held by people and institutions abroad.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The crowding-out effect refers to the possibility that deficit spending may motivate people to increase their saving in anticipation of higher future taxes.

Correct AnswerverifiedShow Answer

An economist who favors smaller government would recommend:

Correct AnswerverifiedShow Answer

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information,it:

Correct AnswerverifiedShow Answer

The cyclically adjusted budget refers to:

Correct AnswerverifiedShow Answer

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