Question 1

A procyclical ﬁscal policy, like those of many state and local governments in the United States, tends to

Accepted Answer

A)   worsen recessions or inﬂation.
B)   become contractionary during inﬂationary periods.
C)   raise government spending or cut taxes during recessions.
D)   increase the budget deﬁcit during recessionary periods.E) A) and B)
F) B) and C)

Question 2

Describe the problem of timing in conducting ﬁscal policy.

Accepted Answer

The timing problem refers to the three l...

Question 3

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Accepted Answer

A)   reducing government expenditures by $12 billion.
B)   reducing government expenditures by $60 billion.
C)   increasing taxes by $15 billion.
D)   increasing taxes by $20 billion.E) A) and D)
F) A) and B)

Question 4

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

Accepted Answer

A)   contractionary ﬁscal policy.
B)   no change in ﬁscal policy.
C)   expansionary ﬁscal policy.
D)   countercyclical ﬁscal policy.E) All of the above
F) B) and C)

Question 5

Accepted Answer

A)   reduce government expenditures and taxes by equal-size amounts.
B)   reduce government expenditures or increase taxes.
C)   increase government expenditures or reduce taxes.
D)   reduce unemployment compensation beneﬁts.E) B) and C)
F) A) and D)

Question 6

Accepted Answer

A)   inﬂation
B)   an increase in stock prices
C)   offsetting state and local ﬁnance
D)   a ratchet effectE) A) and B)
F) A) and C)

Question 7

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in
absolute terms.

Accepted Answer

A) True 
 B)False

Question 8

The actual and cyclically adjusted budgets will be equal when the economy is at full employment.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following represents the most expansionary ﬁscal policy?

Accepted Answer

A)   a $10 billion tax cut
B)   a $10 billion increase in government spending
C)   a $10 billion tax increase
D)   a $10 billion decrease in government spendingE) All of the above
F) A) and C)

Question 10

A decrease in taxes is one way to pursue a contractionary ﬁscal policy because it will make government
revenues contract.

Accepted Answer

A) True 
 B)False

Question 11

You are given the following information about aggregate demand at the existing price level for an economy: (1)  consumption = $500 billion, (2)  investment = $50 billion, (3)  government purchases = $100
Billion, and (4)  net export = $20 billion. If the full-employment level of GDP for this economy is $620
Billion, then what combination of actions would be most consistent with closing the GDP gap here?

Accepted Answer

A)   increase government spending and taxes
B)   decrease government spending and taxes
C)   decrease government spending and increase taxes
D)   increase government spending and decrease taxesE) None of the above
F) C) and D)

Question 12

Accepted Answer

A)   an inﬂationary GDP gap.
B)   a recessionary GDP gap.
C)   a recession.
D)   cost-push inﬂation.E) All of the above
F) None of the above

Question 13

Accepted Answer

A)   the most appropriate ﬁscal policy is an increase of government expenditures or a reduction of taxes.
B)   the most appropriate ﬁscal policy is a reduction of government expenditures or an increase of taxes.
C)   government should undertake neither expansionary nor contractionary ﬁscal policy.
D)   the economy is achieving its maximum possible output.E) C) and D)
F) B) and D)

Question 14

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

Accepted Answer

A) True 
 B)False

Question 15

The "stimulus package" that the government implemented in response to the Great Recession of 2007-
09 made the cyclically adjusted budget of the U.S. have a very large positive balance in that time
period.

Accepted Answer

A) True 
 B)False

Question 16

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

Accepted Answer

A)   increasing government spending by $4 billion.
B)   increasing government spending by $40 billion.
C)   decreasing taxes by $4 billion.
D)   increasing taxes by $4 billion.E) A) and B)
F) None of the above

Question 17

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the
Actual budget deﬁcit is

Accepted Answer

A)   $200 billion.
B)   $20 billion.
C)   $40 billion.
D)   $60 billion.E) B) and C)
F) B) and D)

Question 18

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the
Cyclically adjusted budget deﬁcit is

Accepted Answer

A)   $40 billion.
B)   zero.
C)   $60 billion.
D)   $20 billion.E) A) and B)
F) A) and C)

Question 19

To say that "the U.S. public debt is mostly held internally" is to say that

Accepted Answer

A)   only interest payments on the public debt are an economic burden.
B)   oﬃcial ﬁgures understate the size of the public debt.
C)   the bulk of the public debt is owned by U.S. citizens and institutions.
D)   the public debt is equal to the land and building assets owned by the federal government.E) A) and B)
F) B) and C)

Question 20

Discretionary ﬁscal policy refers to

Accepted Answer

A)   any change in government spending or taxes that destabilizes the economy.
B)   the authority that the president has to change personal income tax rates.
C)   intentional changes in taxes and government expenditures made by Congress to stabilize the economy.
D)   the changes in taxes and transfers that occur as GDP changes.E) All of the above
F) A) and D)

Exam 13: Fiscal Policy, Deficits, and Debt

Correct Answer
verified

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the Cyclically adjusted budget deﬁcit is

Correct Answer
verified

Correct Answer
verified

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Correct Answer
verified

A procyclical ﬁscal policy, like those of many state and local governments in the United States, tends to

Correct Answer
verified

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

Correct Answer
verified

To say that "the U.S. public debt is mostly held internally" is to say that

Correct Answer
verified

Discretionary ﬁscal policy refers to

Correct Answer
verified

Correct Answer
verified

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

Correct Answer
verified

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

Correct Answer
verified

Describe the problem of timing in conducting ﬁscal policy.

Correct Answer
verified
The timing problem refers to the three l...
View Answer

A decrease in taxes is one way to pursue a contractionary ﬁscal policy because it will make government revenues contract.

Correct Answer
verified

Which of the following represents the most expansionary ﬁscal policy?

Correct Answer
verified

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

Correct Answer
verified

The "stimulus package" that the government implemented in response to the Great Recession of 2007- 09 made the cyclically adjusted budget of the U.S. have a very large positive balance in that time period.

Correct Answer
verified

The actual and cyclically adjusted budgets will be equal when the economy is at full employment.

Correct Answer
verified

Correct Answer
verified

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the Actual budget deﬁcit is

Correct Answer
verified

Correct Answer
verified

Exam 13: Fiscal Policy, Deficits, and Debt

Correct AnswerverifiedShow Answer

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the Cyclically adjusted budget deﬁcit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Correct AnswerverifiedShow Answer

A procyclical ﬁscal policy, like those of many state and local governments in the United States, tends to

Correct AnswerverifiedShow Answer

Expansionary ﬁscal policy will tend to reduce the budget deﬁcit.

Correct AnswerverifiedShow Answer

To say that "the U.S. public debt is mostly held internally" is to say that

Correct AnswerverifiedShow Answer

Discretionary ﬁscal policy refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

Correct AnswerverifiedShow Answer

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

Correct AnswerverifiedShow Answer

Describe the problem of timing in conducting ﬁscal policy.

Correct AnswerverifiedThe timing problem refers to the three l...View AnswerShow Answer

A decrease in taxes is one way to pursue a contractionary ﬁscal policy because it will make government revenues contract.

Correct AnswerverifiedShow Answer

Which of the following represents the most expansionary ﬁscal policy?

Correct AnswerverifiedShow Answer

If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by

Correct AnswerverifiedShow Answer

The "stimulus package" that the government implemented in response to the Great Recession of 2007- 09 made the cyclically adjusted budget of the U.S. have a very large positive balance in that time period.

Correct AnswerverifiedShow Answer

The actual and cyclically adjusted budgets will be equal when the economy is at full employment.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the diagram, where T is tax revenues and G is government expenditures. All ﬁgures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $200 billion, the Actual budget deﬁcit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The timing problem refers to the three l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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