Question 1

The crowding-out effect suggests that

Accepted Answer

A)  increases in consumption are always at the expense of saving.
B)  increases in government spending will close a recessionary expenditure gap.
C)  increases in government spending may reduce private investment.
D)  high taxes reduce both consumption and saving.E) A) and B)
F) A) and C)

Question 2

A budget deficit causes the government to issue or sell Treasury bonds.

Accepted Answer

A) True 
 B)False

Question 3

(Last Word)  In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ; by 2040 it is projected to be .

Accepted Answer

A)  10:1; 3:1
B)  3:1; 2:1
C)  5:1; 2:1
D)  2:1; 3:1E) B) and C)
F) A) and B)

Question 4

If Congress adjusted the U.S.tax system so that the MPC was reduced, the

Accepted Answer

A)  economy would become more inflation prone.
B)  economy would become less stable.
C)  stability of the economy would be unaffected.
D)  economy would become more stable.E) A) and D)
F) C) and D)

Question 5

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 6

If people expected that a fiscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

Accepted Answer

A)  stronger.
B)  weaker.
C)  the exact opposite of what was intended.
D)  as the multiplier effect would predict.E) C) and D)
F) None of the above

Question 7

Contractionary fiscal policy is so named because it

Accepted Answer

A)  involves a contraction of the nation's money supply.
B)  necessarily reduces the size of government.
C)  is aimed at reducing aggregate demand and thus achieving price stability.
D)  is expressly designed to expand real GDP.E) A) and B)
F) A) and C)

Question 8

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy

Accepted Answer

A)  makes the actual budget a better reflection of the condition of the economy than the standardized budget.
B)  does not produce a cyclical deficit, as discretionary policy does.
C)  is not subject to the timing problems of discretionary policy.
D)  has a greater multiplier effect than discretionary policy.E) A) and D)
F) A) and C)

Question 9

One of the potential consequences of the public debt is that it may

Accepted Answer

A)  make income distribution more equitable.
B)  increase the debt burden of foreign creditors.
C)  lead to additional future taxes that reduce economic incentives.
D)  decrease interest rates and increase investment spending.E) C) and D)
F) B) and C)

Question 10

The Medicare trust fund is expected, if current flows continue, to be depleted within a couple of decades.

Accepted Answer

A) True 
 B)False

Question 11

The public debt is the

Accepted Answer

A)  amount of U.S.paper currency in circulation.
B)  ratio of all past deficits to all past surpluses.
C)  accumulation of all past deficits minus all past surpluses.
D)  difference between current government expenditures and current tax revenues.E) A) and B)
F) B) and D)

Question 12

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

Question 13

Fiscal policy is enacted through changes in

Accepted Answer

A)  interest rates and the price level.
B)  the supply of money and foreign exchange.
C)  unemployment and inflation.
D)  taxation and government spending.E) All of the above
F) A) and B)

Question 14

How is the public debt calculated?

Accepted Answer

A)  by subtracting the government's total liabilities from its total assets
B)  by cumulating the annual government purchases over time
C)  by subtracting current government spending from current government tax revenues
D)  by cumulating the annual difference between tax revenues and government spending over the yearsE) B) and C)
F) All of the above

Question 15

The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)

Accepted Answer

A)  budget lag.
B)  recognition lag.
C)  operational lag.
D)  administrative lag.E) A) and C)
F) A) and B)

Question 16

The crowding-out effect tends to be stronger when the economy

Accepted Answer

A)  has a lot of excess productive capacity.
B)  is at, or close to, full employment.
C)  has a very small net exports or foreign sector.
D)  is a very open economy with a large foreign sector.Topic: Problems, Criticisms, and Complications of Implementing Fiscal PolicyE) C) and D)
F) A) and B)

Question 17

When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be

Accepted Answer

A)  passive.
B)  automatic.
C)  countercyclical.
D)  nondiscretionary.E) A) and B)
F) A) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The American Recovery and Reinvestment Act of 2009

Accepted Answer

A)  created a $700 billion rescue package for financial institutions.
B)  cut taxes by $152 billion, distributed primarily as rebate checks to taxpayers.
C)  implemented a $787 billion package of tax cuts and government expenditure increases.
D)  substantially lowered interest rates in an attempt to stimulate investment spending.E) None of the above
F) All of the above

Question 20

Which of the following is a true statement?

Accepted Answer

A)  Fiscal policy has been expansionary every year since 2000.
B)  Fiscal policy has been contractionary every year since 2000.
C)  Fiscal policy swung from expansionary to contractionary in 2002.
D)  Fiscal policy swung from contractionary to expansionary in 2002.E) A) and B)
F) B) and C)

Exam 33: Fiscal Policy, Deficits, and Debt

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

One of the potential consequences of the public debt is that it may

Correct AnswerverifiedShow Answer

If people expected that a fiscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be

Correct AnswerverifiedShow Answer

The Medicare trust fund is expected, if current flows continue, to be depleted within a couple of decades.

Correct AnswerverifiedShow Answer

The public debt is the

Correct AnswerverifiedShow Answer

The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)

Correct AnswerverifiedShow Answer

A budget deficit causes the government to issue or sell Treasury bonds.

Correct AnswerverifiedShow Answer

When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be

Correct AnswerverifiedShow Answer

The crowding-out effect suggests that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The American Recovery and Reinvestment Act of 2009

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

The crowding-out effect tends to be stronger when the economy

Correct AnswerverifiedShow Answer

Fiscal policy is enacted through changes in

Correct AnswerverifiedShow Answer

How is the public debt calculated?

Correct AnswerverifiedShow Answer

If Congress adjusted the U.S.tax system so that the MPC was reduced, the

Correct AnswerverifiedShow Answer

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy

Correct AnswerverifiedShow Answer

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ; by 2040 it is projected to be .

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

Contractionary fiscal policy is so named because it

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified