Question 1

The effectiveness of fiscal policy is NOT affected by _____ lag.

Accepted Answer

A)   an implementation
B)   a countercyclical
C)   an impact
D)   a recognitionE) B) and D)
F) C) and D)

Question 2

During 2013, the U.S. government used contractionary fiscal policy to reduce its budget deficit, and the Federal Reserve expanded the money supply. Economists refer to this type of policy combination as a:

Accepted Answer

A)   counter-countercyclical policy.
B)   neutralizing policy.
C)   monetary offset.
D)   neutralizing offset.E) All of the above
F) C) and D)

Question 3

Which of the following terms is used to describe an expansionary fiscal policy that has little impact on an economy because the necessary increase in government borrowing leads to a decrease in investment spending?

Accepted Answer

A)   backlash offset
B)   fiscal reversion
C)   crowding out
D)   multiplier effectE) A) and B)
F) A) and D)

Question 4

When used in connection with fiscal policy, the term "crowding out" refers to:

Accepted Answer

A)   the ways that the policy effectively crowds out inflation and unemployment from the economy.
B)   a decrease in government spending, which ends up "crowding out" or decreasing aggregate demand.
C)   tradeoffs among different types of spending in the economy, which results in more government spending having a smaller impact on total spending.
D)   the growth of output as an economy makes full use of its idle resources.E) A) and B)
F) None of the above

Question 5

A leakage occurs in an economy when:

Accepted Answer

A)   part of business revenue does not end up as income in the circular flow.
B)   transfer payments grow during recessions in an economy.
C)   the government ends up spending more on fiscal policy than it intended to spend.
D)   part of income is not spent on the country's output but is used for savings, taxes, or imports.E) B) and C)
F) A) and D)

Question 6

Which of the following is the correct sequence of events by which fiscal policy impacts unemployment?

Accepted Answer

A)   An increase in government spending causes an increase in aggregate demand, which leads to higher output with more jobs.
B)   An increase in government spending causes an increase in short-run aggregate supply, which leads to higher output and more jobs.
C)   A decrease in government spending causes an increase in short-run aggregate supply, which leads to higher output and more jobs.
D)   An increase in taxes causes a decrease in aggregate demand, which leads to lower output and more jobs.E) A) and B)
F) A) and C)

Question 7

An increase in _____ would be a fiscal stimulus.

Accepted Answer

A)   open market operations
B)   money supply
C)   government purchases
D)   taxesE) C) and D)
F) A) and D)

Question 8

Government policymakers increase government spending on school construction. The number of jobs in the economy gradually expands over the next three years. The time period that it takes for the number of jobs to change is referred to as _____ lag.

Accepted Answer

A)   an implementation
B)   a countercyclical
C)   an impact
D)   a recognitionE) C) and D)
F) A) and B)

Question 9

Which of the following is a countercyclical policy?

Accepted Answer

A)   Tax cuts are made during an economic expansion.
B)   Tax cuts are made during a recession.
C)   Government purchases are decreased during a recession.
D)   Government purchases are increased during an expansion.E) B) and D)
F) None of the above

Question 10

Why would a supply-sider favor lower marginal tax rates over tax rebates if both policies have the same impact on the total taxes paid?

Accepted Answer

Supply-siders focus on policies that wil...

Question 11

Demand-side policies are more effective in _____, and supply-siders believe that supply-side policies are more effective in:

Accepted Answer

A)   the short run; the long run.
B)   the long run; the short run.
C)   combating inflation; combating unemployment.
D)   combating unemployment; combating inflation.E) A) and D)
F) A) and C)

Question 12

Fiscal policy occurs when the government changes:

Accepted Answer

A)   the money supply to influence government purchases and taxes.
B)   taxes or government spending to influence inflation and unemployment.
C)   regulations to make it harder or easier for companies to produce and sell products.
D)   banking to make it easier or harder to save and invest.E) A) and B)
F) B) and D)

Question 13

An estimate of what the budget deficit would be if the economy was not in a recession and if automatic stabilizers were not in effect is known as the _____ budget deficit.

Accepted Answer

A)   cyclically adjusted
B)   stabilizer adjusted
C)   recession-free
D)   stabilizedE) None of the above
F) B) and D)

Question 14

When an economy is at full employment, expansionary fiscal policies tend to have:

Accepted Answer

A)   little or no impact on national output.
B)   maximum impact on national output.
C)   little or no impact on inflation.
D)   maximum impact on deflation.E) None of the above
F) All of the above

Question 15

According to the permanent income theory, households spend money based on:

Accepted Answer

A)   a belief that their household income will never change.
B)   a belief that there will always be income although it may vary some.
C)   an expectation that the government will provide transfer payments if income ever stops.
D)   their expected income over their lifetime and not based on current income.E) B) and C)
F) A) and D)

Question 16

The multiplier for a change in government purchases is equal to:

Accepted Answer

A)   Change in G × Change in GDP.
B)   Change in GDP / Change in
C)   Change in G / Change in GDP.
D)   Change in G × Change in T.E) All of the above
F) A) and C)

Question 17

A monetary offset of an expansionary fiscal policy occurs when:

Accepted Answer

A)   there is a concurrent rise in unemployment.
B)   contractionary monetary policy is implemented concurrently.
C)   the money supply is raised to pay for the policy.
D)   an increase in government purchases is paid for by extra borrowing.E) A) and C)
F) All of the above

Question 18

Contractionary fiscal policy during a recession affects a country's budget balance by moving the budget:

Accepted Answer

A)   toward a balance of zero.
B)   toward a bigger deficit or a bigger surplus.
C)   into a bigger deficit or smaller surplus.
D)   into a bigger surplus or a smaller deficit.E) A) and D)
F) B) and C)

Question 19

When government leaders choose a policy that moves an economy against the direction that it is naturally going in the business cycle, the leaders are using _____ policy.

Accepted Answer

A)   an active opposition
B)   an automatic offset
C)   a countercyclical
D)   a smoothingE) A) and D)
F) All of the above

Exam 28: Fiscal Policy and the Business Cycle

When government leaders choose a policy that moves an economy against the direction that it is naturally going in the business cycle, the leaders are using _____ policy.

Correct Answer
verified

Which of the following terms is used to describe an expansionary fiscal policy that has little impact on an economy because the necessary increase in government borrowing leads to a decrease in investment spending?

Correct Answer
verified

When used in connection with fiscal policy, the term "crowding out" refers to:

Correct Answer
verified

Fiscal policy occurs when the government changes:

Correct Answer
verified

The multiplier for a change in government purchases is equal to:

Correct Answer
verified

Demand-side policies are more effective in _____, and supply-siders believe that supply-side policies are more effective in:

Correct Answer
verified

Which of the following is the correct sequence of events by which fiscal policy impacts unemployment?

Correct Answer
verified

Which of the following is a countercyclical policy?

Correct Answer
verified

Government policymakers increase government spending on school construction. The number of jobs in the economy gradually expands over the next three years. The time period that it takes for the number of jobs to change is referred to as _____ lag.

Correct Answer
verified

A monetary offset of an expansionary fiscal policy occurs when:

Correct Answer
verified

An increase in _____ would be a fiscal stimulus.

Correct Answer
verified

According to the permanent income theory, households spend money based on:

Correct Answer
verified

Contractionary fiscal policy during a recession affects a country's budget balance by moving the budget:

Correct Answer
verified

An estimate of what the budget deficit would be if the economy was not in a recession and if automatic stabilizers were not in effect is known as the _____ budget deficit.

Correct Answer
verified

Why would a supply-sider favor lower marginal tax rates over tax rebates if both policies have the same impact on the total taxes paid?

Correct Answer
verified
Supply-siders focus on policies that wil...
View Answer

The effectiveness of fiscal policy is NOT affected by _____ lag.

Correct Answer
verified

During 2013, the U.S. government used contractionary fiscal policy to reduce its budget deficit, and the Federal Reserve expanded the money supply. Economists refer to this type of policy combination as a:

Correct Answer
verified

A leakage occurs in an economy when:

Correct Answer
verified

When an economy is at full employment, expansionary fiscal policies tend to have:

Correct Answer
verified

Exam 28: Fiscal Policy and the Business Cycle

When government leaders choose a policy that moves an economy against the direction that it is naturally going in the business cycle, the leaders are using _____ policy.

Correct AnswerverifiedShow Answer

Which of the following terms is used to describe an expansionary fiscal policy that has little impact on an economy because the necessary increase in government borrowing leads to a decrease in investment spending?

Correct AnswerverifiedShow Answer

When used in connection with fiscal policy, the term "crowding out" refers to:

Correct AnswerverifiedShow Answer

Fiscal policy occurs when the government changes:

Correct AnswerverifiedShow Answer

The multiplier for a change in government purchases is equal to:

Correct AnswerverifiedShow Answer

Demand-side policies are more effective in _____, and supply-siders believe that supply-side policies are more effective in:

Correct AnswerverifiedShow Answer

Which of the following is the correct sequence of events by which fiscal policy impacts unemployment?

Correct AnswerverifiedShow Answer

Which of the following is a countercyclical policy?

Correct AnswerverifiedShow Answer

Government policymakers increase government spending on school construction. The number of jobs in the economy gradually expands over the next three years. The time period that it takes for the number of jobs to change is referred to as _____ lag.

Correct AnswerverifiedShow Answer

A monetary offset of an expansionary fiscal policy occurs when:

Correct AnswerverifiedShow Answer

An increase in _____ would be a fiscal stimulus.

Correct AnswerverifiedShow Answer

According to the permanent income theory, households spend money based on:

Correct AnswerverifiedShow Answer

Contractionary fiscal policy during a recession affects a country's budget balance by moving the budget:

Correct AnswerverifiedShow Answer

An estimate of what the budget deficit would be if the economy was not in a recession and if automatic stabilizers were not in effect is known as the _____ budget deficit.

Correct AnswerverifiedShow Answer

Why would a supply-sider favor lower marginal tax rates over tax rebates if both policies have the same impact on the total taxes paid?

Correct AnswerverifiedSupply-siders focus on policies that wil...View AnswerShow Answer

The effectiveness of fiscal policy is NOT affected by _____ lag.

Correct AnswerverifiedShow Answer

During 2013, the U.S. government used contractionary fiscal policy to reduce its budget deficit, and the Federal Reserve expanded the money supply. Economists refer to this type of policy combination as a:

Correct AnswerverifiedShow Answer

A leakage occurs in an economy when:

Correct AnswerverifiedShow Answer

When an economy is at full employment, expansionary fiscal policies tend to have:

Correct AnswerverifiedShow Answer

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
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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

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Supply-siders focus on policies that wil...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified