Question 1

In the 1930s our main economic problem,said John Maynard Keynes,was

Accepted Answer

A)  inflation.
B)  insufficient aggregate demand.
C)  too much government interference with the economy.
D)  huge budget deficits.E) None of the above
F) A) and B)

Question 2

The impact lag of the economic stimulus package passed in February 2009 was exceeding long due to the fact that by the end of 2009 only ____________ had entered the economy.

Accepted Answer

A)  one fourth
B)  one third
C)  one half
D)  three fourthsE) None of the above
F) C) and D)

Question 3

Suppose government spending equals $500 billion,tax revenue equals $450 billion,and the Treasury issues $50 billion in bonds.In this case the government has

Accepted Answer

A)  a budget surplus of $100 billion.
B)  a balanced budget.
C)  a budget deficit of $50 billion.
D)  a budget deficit of $100 billion.
E)  a budget surplus of $50 billion.F) C) and D)
G) D) and E)

Question 4

Fiscal policy includes each of the following except

Accepted Answer

A)  the money supply.
B)  taxes.
C)  government spending.
D)  the automatic stabilizers.E) C) and D)
F) B) and D)

Question 5

After the end of the recession of 2001,it took _______ months for the economy to recover to full employment

Accepted Answer

A)  9
B)  15
C)  39
D)  48E) B) and C)
F) C) and D)

Question 6

Statement I: The federal budget deficit is about one-third the size of the national debt.
Statement II: Our federal budget deficit in 1992 was more than double the deficit in 1987.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) A) and D)
F) A) and C)

Question 7

The real burden of an increase in the public debt

Accepted Answer

A)  may be very small or conceivably zero when the economy is in the midst of a severe depression.
B)  will be smaller when full employment exists than it will when the economy has large quantities of idle resources.
C)  can be shifted to future generations if the debt is internally financed.
D)  can best be measured by the dollar increase in the size of the debt.E) C) and D)
F) None of the above

Question 8

Which statement is true?

Accepted Answer

A)  The federal budget deficit reached a peak in 1992 and has been declining since then.
B)  The federal budget deficit in fiscal year 1997 was at a record high.
C)  Because we ran federal budget surpluses since 1998,the national debt is falling.
D)  The federal government ran budget surpluses from 1998 to 2001,but returned to deficits since 2002.E) None of the above
F) C) and D)

Question 9

Between fiscal years 2008 and 2010,our federal budget deficit as a percent of GDP

Accepted Answer

A)  rose substantially.
B)  rose slightly.
C)  fell slightly.
D)  fell substantially.E) All of the above
F) C) and D)

Question 10

If the MPC is .8,how much is the multiplier?

Accepted Answer

Multiplier...

Question 11

Statement I: The federal budget deficit more than doubled between 1987 and 1992.
Statement II: High federal budget deficits tend to push up real interest rates.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) A) and D)
F) None of the above

Question 12

Which statement is true about the graph above?

Accepted Answer

A)  Equilibrium GDP is too big.
B)  Equilibrium GDP is too small.
C)  Equilibrium GDP is just the right size.
D)  There is not enough information to determine whether or not equilibrium GDP is the right size.E) A) and B)
F) A) and C)

Question 13

The federal budget deficits of the 1980s

Accepted Answer

A)  are about the same as those of earlier decades.
B)  caused the government debt to increase in absolute terms but not as a percent of GDP.
C)  were due to the persistent recession that occurred throughout the 1980s.
D)  were caused by rising expenditures and tax cuts.E) A) and D)
F) A) and C)

Question 14

To close a recessionary gap we should

Accepted Answer

A)  raise G and raise taxes.
B)  lower G and lower taxes.
C)  raise G and lower taxes.
D)  lower G and raise taxes.E) B) and C)
F) All of the above

Question 15

Transfer payments

Accepted Answer

A)  fall during recessionary periods.
B)  buffer aggregate demand during downturns because disposable income and hence,consumption,do not fall as fast as GDP.
C)  are exclusively a discretionary stabilizer.
D)  are progressive and prevent income from rising as fast as output.E) C) and D)
F) All of the above

Question 16

When the economy begins to slip into a recession,the automatic stabilizers cause

Accepted Answer

A)  transfer payments to increase and tax collections to decline.
B)  tax rates to increase so that tax revenues will remain relatively stable.
C)  interest rates to decline.
D)  a movement toward a budget surplus.
E)  the budget deficit to get smaller.F) C) and D)
G) C) and E)

Question 17

Which of the following policies should be used to close an inflationary GDP gap?

Accepted Answer

A)  Increases in government spending and increases in transfer payments
B)  Tax increases
C)  Increases in government spending
D)  Increases in transfer paymentsE) A) and B)
F) None of the above

Question 18

If the deficit is falling,the national debt will be _______.

Accepted Answer

rising (al...

Question 19

Nondiscretionary fiscal policy relies in part on

Accepted Answer

A)  spending for national defense.
B)  automatic changes in personal and corporate income tax receipts to stabilize economic activity.
C)  checks and balances established by the United States Constitution.
D)  "do nothing" economic policies,based on the belief that a market economy is stable and self-adjusting.E) A) and B)
F) B) and C)

Question 20

When there is a deflationary gap _______ GDP is greater than _______ GDP.

Accepted Answer

full emplo...

Exam 12: Fiscal Policy and the National Debt

Statement I: The federal budget deficit is about one-third the size of the national debt. Statement II: Our federal budget deficit in 1992 was more than double the deficit in 1987.

Correct AnswerverifiedShow Answer

If the deficit is falling,the national debt will be _______.

Correct Answerverifiedrising (al...View AnswerShow Answer

Between fiscal years 2008 and 2010,our federal budget deficit as a percent of GDP

Correct AnswerverifiedShow Answer

Suppose government spending equals $500 billion,tax revenue equals $450 billion,and the Treasury issues $50 billion in bonds.In this case the government has

Correct AnswerverifiedShow Answer

Statement I: The federal budget deficit more than doubled between 1987 and 1992. Statement II: High federal budget deficits tend to push up real interest rates.

Correct AnswerverifiedShow Answer

Transfer payments

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Which statement is true about the graph above?

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The impact lag of the economic stimulus package passed in February 2009 was exceeding long due to the fact that by the end of 2009 only ____________ had entered the economy.

Correct AnswerverifiedShow Answer

When there is a deflationary gap _______ GDP is greater than _______ GDP.

Correct Answerverifiedfull emplo...View AnswerShow Answer

The federal budget deficits of the 1980s

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Which statement is true?

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To close a recessionary gap we should

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Which of the following policies should be used to close an inflationary GDP gap?

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In the 1930s our main economic problem,said John Maynard Keynes,was

Correct AnswerverifiedShow Answer

When the economy begins to slip into a recession,the automatic stabilizers cause

Correct AnswerverifiedShow Answer

After the end of the recession of 2001,it took _______ months for the economy to recover to full employment

Correct AnswerverifiedShow Answer

If the MPC is .8,how much is the multiplier?

Correct AnswerverifiedMultiplier...View AnswerShow Answer

The real burden of an increase in the public debt

Correct AnswerverifiedShow Answer

Nondiscretionary fiscal policy relies in part on

Correct AnswerverifiedShow Answer

Fiscal policy includes each of the following except

Correct AnswerverifiedShow Answer

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rising (al...
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When there is a deflationary gap _ GDP is greater than _ GDP.

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full emplo...
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Multiplier...
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