Question 1

The top marginal rate of the federal personal income tax was lowered under the administration of

Accepted Answer

A)  Gerald Ford.
B)  Jimmy Carter.
C)  Ronald Reagan.
D)  Richard Nixon.
E)  Bill Clinton.F) All of the above
G) B) and E)

Question 2

Statement I: The federal budget deficit is the same thing as the national debt.
Statement II: The national debt will continue to rise even if the federal budget deficit is lowered.

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

Question 3

Between 1992 and 2000,the federal deficit

Accepted Answer

A)  declined by over $200 billion.
B)  declined by over $100 billion.
C)  declined slightly.
D)  risen slightly.
E)  turned into a surplus.F) C) and D)
G) A) and B)

Question 4

An annually balanced budget

Accepted Answer

A)  is the same as a cyclically balanced budget.
B)  is opposed by many economists because it would require cutting spending and raising taxes during recession,which might very well produce a depression.
C)  requires a constitutional amendment.
D)  requires the Congress and the President to approve special legislation authorizing the balanced budget.
E)  is advocated by Keynesians.F) B) and E)
G) B) and D)

Question 5

In order to pass any fiscal policy measure we need a

Accepted Answer

A)  two-thirds vote in both houses of Congress and the bill signed by the President.
B)  a majority vote in both houses of Congress and the bill signed by the President.
C)  a two-thirds vote in either house.
D)  a majority vote in either house.E) C) and D)
F) All of the above

Question 6

During a recession,liberal economists would be most in favor of

Accepted Answer

A)  spending cuts.
B)  spending increases.
C)  tax cuts.
D)  tax increases.E) A) and B)
F) None of the above

Question 7

Which of the following best describes the built-in stabilizers as they function in the United States?

Accepted Answer

A)  Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as the national income rises.
B)  Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of national income.
C)  Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as national income rises.
D)  Personal and corporate income tax collections and transfers and subsidies all automatically vary directly with the level of national income.E) A) and D)
F) B) and C)

Question 8

The federal government deficit or surplus

Accepted Answer

A)  is not affected by the level of GDP.
B)  is not affected by discretionary fiscal policy.
C)  may be more a symptom of economic distress than a result of intentional fiscal policy.
D)  should be balanced at all times to prevent business cycles.E) A) and B)
F) B) and D)

Question 9

If equilibrium GDP is $1 trillion greater than full employment GDP,and there is an inflationary gap of $250 billion,the multiplier is

Accepted Answer

A)  zero.
B)  1.
C)  2.5.
D)  4.
E)  impossible to find.F) A) and B)
G) B) and E)

Question 10

In the late 1970s and early 1980s the goals of fiscal policy were

Accepted Answer

A)  completely attained.
B)  largely attained.
C)  largely unattained.
D)  completely unattaineD.E) A) and B)
F) A) and C)

Question 11

Which of the following best describes what is meant by automatic stabilization policies?

Accepted Answer

A)  Policies that automatically help boost the economy when heading into an economic upturn
B)  Policies that require the direct action of the movement of the economy
C)  Policies that tend to dampen increases in aggregate demand during expansion and stimulate aggregate demand during recession without the requirement of political voting
D)  Any policy that acts on fiscal matters to improve economic performanceE) A) and B)
F) None of the above

Question 12

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

Accepted Answer

A)  weak aggregate demand.
B)  too much government spending.
C)  big budget deficits.
D)  high interest rates.
E)  that taxes were too low.F) A) and B)
G) B) and E)

Question 13

When equilibrium GDP is too large,we have

Accepted Answer

A)  a recessionary gap.
B)  a depression.
C)  an inflationary gap.
D)  escalating inflation.E) All of the above
F) C) and D)

Question 14

Which statement is false?

Accepted Answer

A)  We had more budget surpluses in the 1990s than we did in the 1970s and 1980s.
B)  We had no budget surpluses in the 1970s and 1980s.
C)  We had bigger budget deficits in the 1980s than we did in the 1970s.
D)  None of the choices/statements are false.E) B) and C)
F) A) and B)

Question 15

If equilibrium GDP is $800 billion greater than the full employment GDP and the multiplier is 4,how much is the inflationary gap?

Accepted Answer

800/4 = $2...

Question 16

A crowding-in effect occurs

Accepted Answer

A)  When an increase in government spending leads to an increase in savings.
B)  When increased government borrowing reduces the quantity of funds that businesses can borrow.
C)  That increases investment each time government spending increases.
D)  When the increase in GDP caused by the increased government spending makes businesses see more investment projects as profitable.E) A) and D)
F) B) and C)

Question 17

A budget deficit exists when

Accepted Answer

A)  government spending exceeds government tax revenues.
B)  government spending equals government tax revenues.
C)  the public debt decreases.
D)  tax revenues exceed government spending.E) A) and D)
F) C) and D)

Question 18

In addition to the economic stimulus provided by a public works project during a recession,the government is able to provide some services to the population in future years

Accepted Answer

A)  at no cost
B)  at least cost
C)  in a timely fashion
D)  reducing the need for automatic stabilizersE) A) and B)
F) A) and C)

Question 19

The budget deficit

Accepted Answer

A)  fell every year in the 1990s.
B)  fell steadily from 1993 through 1997.
C)  fell steadily every year since 2001.
D)  increased steadily every year from 2001 to the present.E) None of the above
F) All of the above

Question 20

Which of the following is NOT an automatic stabilizer?

Accepted Answer

A)  A change in the tax rate to fight a recession.
B)  A decrease in tax collections due to a recession.
C)  Decreased unemployment benefits as the economy expands.
D)  Increased public assistance payments during a recession.
E)  All of the choices are correctF) A) and E)
G) None of the above

Exam 12: Fiscal Policy and the National Debt

Which statement is false?

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Which of the following is NOT an automatic stabilizer?

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In the late 1970s and early 1980s the goals of fiscal policy were

Correct AnswerverifiedShow Answer

A budget deficit exists when

Correct AnswerverifiedShow Answer

Between 1992 and 2000,the federal deficit

Correct AnswerverifiedShow Answer

A crowding-in effect occurs

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If equilibrium GDP is $800 billion greater than the full employment GDP and the multiplier is 4,how much is the inflationary gap?

Correct Answerverified800/4 = $2...View AnswerShow Answer

Which of the following best describes what is meant by automatic stabilization policies?

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The budget deficit

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During a recession,liberal economists would be most in favor of

Correct AnswerverifiedShow Answer

In order to pass any fiscal policy measure we need a

Correct AnswerverifiedShow Answer

If equilibrium GDP is $1 trillion greater than full employment GDP,and there is an inflationary gap of $250 billion,the multiplier is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When equilibrium GDP is too large,we have

Correct AnswerverifiedShow Answer

In addition to the economic stimulus provided by a public works project during a recession,the government is able to provide some services to the population in future years

Correct AnswerverifiedShow Answer

Which of the following best describes the built-in stabilizers as they function in the United States?

Correct AnswerverifiedShow Answer

The top marginal rate of the federal personal income tax was lowered under the administration of

Correct AnswerverifiedShow Answer

The federal government deficit or surplus

Correct AnswerverifiedShow Answer

An annually balanced budget

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Statement I: The federal budget deficit is the same thing as the national debt. Statement II: The national debt will continue to rise even if the federal budget deficit is lowered.

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800/4 = $2...
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