Question 1

The three categories of federal government expenditures,in addition to government purchases,are

Accepted Answer

A)  interest on the national debt, grants to state and local governments, and transfer payments.
B)  interest on the national debt, defense spending, and transfer payments.
C)  defense spending, budgets of federal agencies, and transfer payments.
D)  defense spending, Social Security, and Medicare.E) A) and C)
F) B) and C)

Question 2

During most of the years of the Great Depression,the actual federal budget was in ________,and the cyclically adjusted budget was in ________.

Accepted Answer

A)  deficit; surplus
B)  surplus; surplus
C)  deficit; deficit
D)  surplus; deficitE) None of the above
F) B) and D)

Question 3

The total value of U.S.Treasury bonds outstanding equals

Accepted Answer

A)  the federal government deficit.
B)  the federal government surplus.
C)  the federal government debt.
D)  the cyclically adjusted budget deficit.E) None of the above
F) A) and B)

Question 4

Automatic stabilizers refer to

Accepted Answer

A)  the money supply and interest rates that automatically increase or decrease along with the business cycle.
B)  government spending and taxes that automatically increase or decrease along with the business cycle.
C)  changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives.
D)  changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.E) A) and D)
F) B) and C) B

Question 5

Figure 18-9
 
-Refer to Figure 18-9.Given that the economy has moved from A to B in the graph above,which of the following would the appropriate fiscal policy to achieve potential GDP?

Accepted Answer

A)  increase taxes
B)  increase government spending
C)  decrease the money supply
D)  increase interest ratesE) B) and C)
F) A) and C)

Question 6

Cutting taxes

Accepted Answer

A)  will lower disposable income and lower spending.
B)  will raise disposable income and lower spending.
C)  will lower disposable income and raise spending.
D)  will raise disposable income and raise spending.E) A) and B)
F) None of the above

Question 7

A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008.

Accepted Answer

A)  increase; more
B)  increase; less
C)  decrease; more
D)  decrease; lessE) B) and C)
F) A) and D)

Question 8

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Accepted Answer

A)  less than it would be without the supply-side effects.
B)  increased as aggregate real income and output rise in the long run.
C)  unaffected by the shifting long-run aggregate supply curve.
D)  dependent upon the impact of this tax change on consumer disposable income.E) None of the above
F) B) and C)

Question 9

To complement actions by the Fed to reduce inflation,Congress and the President can cut spending and/or raise taxes.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the federal budget deficit for the year was $100 billion and the economy was in a recession.If the economy had been at potential GDP,it is estimated that tax revenues would have been $60 billion higher and government spending on transfer payments $50 billion lower.Using these estimates,the cyclically adjusted budget

Accepted Answer

A)  deficit was $210 billion.
B)  deficit was $110 billion.
C)  surplus was $10 billion.
D)  surplus was $110 billion.E) A) and B)
F) C) and D) C

Question 11

If the economy is falling below potential real GDP,which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

Accepted Answer

A)  the money supply and a decrease in interest rates.
B)  government purchases.
C)  oil prices.
D)  taxes.E) B) and C)
F) C) and D)

Question 12

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Accepted Answer

A)  an induced; an autonomous
B)  an expansionary; a contractionary
C)   an autonomous; an induced
D)  a contractionary; an expansionaryE) All of the above
F) A) and B)

Question 13

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

Accepted Answer

Accurately timing fiscal policy may be m...

Question 14

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Accepted Answer

A)  The Federal Reserve cut its target for the federal funds rate.
B)  There was an increase in government spending on defense and unemployment compensation.
C)  Taxpayers were given rebates on taxes they already paid.
D)  Income taxes were raised to reduce the federal budget deficit and reduce interest rates.E) B) and D)
F) B) and C)

Question 15

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

Accepted Answer

Too little money would be caused by too small of a money supply by the Federal Reserve.Too little spending could be caused by a variety of reasons such as a decrease in consumption spending by households because they become pessimistic about the future,a decrease in investment spending by firms because they lower their estimates of the future profitability of new factories and machinery,or a decrease in U.S.exports because a major trading partner is in a recession.

Question 16

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

Accepted Answer

A)  decrease in taxes will be saved by households and not spent, and some portion will be spent on imported goods.
B)  decrease in taxes will be saved by households and not spent, and some portion will be spent on consumer durable goods.
C)  increase in government purchases will be saved by households and not spent, and some portion will be spent on imported goods.
D)  increase in government purchases will be saved by households and not spent, and some portion will be spent on consumer durable goods.E) A) and C)
F) All of the above

Question 17

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest tax cuts occurred in which category?

Accepted Answer

A)  business tax cuts
B)  energy tax cuts
C)  individual tax cuts
D)  infrastructure tax cutsE) A) and C)
F) None of the above

Question 18

Accumulating debt poses a problem for the U.S.federal government because

Accepted Answer

A)  it is currently in danger of defaulting on on the debt.
B)  a large debt-to-GDP ratio causes crowding out.
C)  building roads and bridges do not yield enough benefits to justify their cost.
D)  the debt has to ultimately be paid off.E) C) and D)
F) None of the above

Question 19

Borrowing to pay for long-lived capital expenditures makes sense as

Accepted Answer

A)  the benefits are received in the current year so the burden of paying for them should be spread over many years.
B)  the benefits are received over many years so the burden of paying for them should be spread over many years.
C)  the benefits are received in the current year so the burden of paying for them should be paid in the current year.
D)  the benefits are received over many years so the burden of paying for them should be paid in the current year.E) None of the above
F) C) and D)

Question 20

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential

Accepted Answer

A)  this will result in a current budget deficit.
B)  the cyclically adjusted budget will be balanced.
C)  government transfer payments will be rising and tax receipts will be falling.
D)  All of the above are correct.E) A) and C)
F) A) and B)

Exam 18: Fiscal Policy

The three categories of federal government expenditures,in addition to government purchases,are

Correct Answer
verified

During most of the years of the Great Depression,the actual federal budget was in ,and the cyclically adjusted budget was in .

Correct Answer
verified

The total value of U.S.Treasury bonds outstanding equals

Correct Answer
verified

Automatic stabilizers refer to

Correct Answer
verified
B

Figure 18-9 -Refer to Figure 18-9.Given that the economy has moved from A to B in the graph above,which of the following would the appropriate fiscal policy to achieve potential GDP?

Correct Answer
verified

Cutting taxes

Correct Answer
verified

A permanent tax cut would likely consumption spending than would a tax rebate like the one issued in 2008.

Correct Answer
verified

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Correct Answer
verified

To complement actions by the Fed to reduce inflation,Congress and the President can cut spending and/or raise taxes.

Correct Answer
verified

Correct Answer
verified
C

If the economy is falling below potential real GDP,which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

Correct Answer
verified

A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

Correct Answer
verified

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

Correct Answer
verified
Accurately timing fiscal policy may be m...
View Answer

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Correct Answer
verified

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

Correct Answer
verified

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest tax cuts occurred in which category?

Correct Answer
verified

Accumulating debt poses a problem for the U.S.federal government because

Correct Answer
verified

Borrowing to pay for long-lived capital expenditures makes sense as

Correct Answer
verified

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential

Correct Answer
verified

Exam 18: Fiscal Policy

The three categories of federal government expenditures,in addition to government purchases,are

Correct AnswerverifiedShow Answer

During most of the years of the Great Depression,the actual federal budget was in ________,and the cyclically adjusted budget was in ________.

Correct AnswerverifiedShow Answer

The total value of U.S.Treasury bonds outstanding equals

Correct AnswerverifiedShow Answer

Automatic stabilizers refer to

Correct AnswerverifiedB

Figure 18-9 -Refer to Figure 18-9.Given that the economy has moved from A to B in the graph above,which of the following would the appropriate fiscal policy to achieve potential GDP?

Correct AnswerverifiedShow Answer

Cutting taxes

Correct AnswerverifiedShow Answer

A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008.

Correct AnswerverifiedShow Answer

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Correct AnswerverifiedShow Answer

To complement actions by the Fed to reduce inflation,Congress and the President can cut spending and/or raise taxes.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

If the economy is falling below potential real GDP,which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

Correct AnswerverifiedShow Answer

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Correct AnswerverifiedShow Answer

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

Correct AnswerverifiedAccurately timing fiscal policy may be m...View AnswerShow Answer

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

Correct AnswerverifiedShow Answer

The problem typically during a recession is not that there is too little money,but too little spending.If the problem was too little money,what would be its cause? If the problem was too little spending,what could be its cause?

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

Correct AnswerverifiedShow Answer

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest tax cuts occurred in which category?

Correct AnswerverifiedShow Answer

Accumulating debt poses a problem for the U.S.federal government because

Correct AnswerverifiedShow Answer

Borrowing to pay for long-lived capital expenditures makes sense as

Correct AnswerverifiedShow Answer

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential

Correct AnswerverifiedShow Answer

Correct Answer
verified

During most of the years of the Great Depression,the actual federal budget was in ,and the cyclically adjusted budget was in .

Correct Answer
verified

Correct Answer
verified

Correct Answer
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B

Correct Answer
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Correct Answer
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A permanent tax cut would likely consumption spending than would a tax rebate like the one issued in 2008.

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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C

Correct Answer
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A change in consumption spending caused by income changes is change in spending,and a change in government spending that occurs to improve roads and bridges is change in spending.

Correct Answer
verified

Correct Answer
verified
Accurately timing fiscal policy may be m...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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