Question 1

Economist John Maynard Keynes once said, "In the long run, we are all dead." Keynes was likely:

Accepted Answer

A)   in favor of using fiscal policy.
B)   against the use of fiscal policy.
C)   in favor of allowing the economy to always correct itself.
D)   Economy never achieves its long run equilibrium.E) B) and C)
F) A) and C)

Question 2

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Accepted Answer

A)   holds, and people increase their spending.
B)   holds, and people save more.
C)   fails to hold, and people increase their spending.
D)   fails to hold, and people save more.E) A) and B)
F) A) and C)

Question 3

Since 1940 the US Government has generally had a budget:

Accepted Answer

A)   surplus.
B)   that has been balanced
C)   multiplier.
D)   deficit.E) A) and D)
F) B) and D)

Question 4

If interest rates increase, the government debt becomes:

Accepted Answer

A)   more expensive to pay.
B)   less expensive to pay.
C)   more volatile.
D)   less of a burden.E) B) and C)
F) C) and D)

Question 5

What is a benefit of giving the government freedom to spend more than they receive in taxes and run a deficit?

Accepted Answer

A)   It allows the government to be flexible if something unexpected happens.
B)   It can make it more difficult for businesses and consumers to borrow.
C)   There is never a good enough reason to allow public debt.
D)   The federal government cannot run a deficit.E) All of the above
F) C) and D)

Question 6

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

Accepted Answer

A)   increase aggregate demand.
B)   decrease aggregate demand.
C)   increase aggregate supply.
D)   decrease aggregate supply.E) B) and C)
F) A) and C)

Question 7

One of the main difficulties with implementing fiscal policy is:

Accepted Answer

A)   the time lag between the time the policy is chosen and the time it gets enacted.
B)   deciding on a policy without all the relevant information.
C)   the danger in overshooting or undershooting the goal of full employment.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 8

If the economy in the graph shown is currently at point B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely move to point:

Accepted Answer

A)   A
B)   It is likely to be unaffected and stay at point B
C)   C
D)   DE) All of the above
F) C) and D)

Question 9

Discretionary fiscal policy is:

Accepted Answer

A)   fiscal policy that the government actively chooses to adopt.
B)   taxes and government spending that affect fiscal policy without specific action from policymakers.
C)   fiscal policy that the government enacts only for a short period of time.
D)   taxes and government spending that the government actively votes against adoption.E) A) and B)
F) A) and C)

Question 10

When fiscal policy makers wish to reduce aggregate demand, they could enact:

Accepted Answer

A)   contractionary fiscal policy.
B)   expansionary fiscal policy.
C)   contractionary monetary policy.
D)   expansionary monetary policy.E) A) and B)
F) A) and C)

Question 11

If the fiscal policy makers aim to increase aggregate demand, they will likely enact:

Accepted Answer

A)   expansionary fiscal policy.
B)   contractionary fiscal policy.
C)   expansionary monetary policy.
D)   contractionary monetary policy.E) A) and B)
F) A) and D)

Question 12

Fiscal policy that the government actively chooses to adopt is called:

Accepted Answer

A)   automatic stabilizing policy.
B)   discretionary fiscal policy.
C)   monetary policy.
D)   contractionary policy.E) None of the above
F) A) and B)

Question 13

When the government enacts fiscal policy, it:

Accepted Answer

A)   may not always be able to improve matters.
B)   might make things worse.
C)   can bring the economy to its long-run equilibrium more quickly than it can correct itself.
D)   All of these are true.E) None of the above
F) A) and B)

Question 14

If the government were to increase its spending, it would expect:

Accepted Answer

A)   aggregate demand to shift to the right.
B)   aggregate demand to shift to the left.
C)   aggregate supply to shift to the right.
D)   aggregate supply to shift to the left.E) B) and D)
F) A) and D)

Question 15

During a severe recession, the government decides to lower its tax rates to give consumers relief, and allow them to pay less in taxes. This is an example of:

Accepted Answer

A)   discretionary fiscal policy.
B)   an automatic stabilizer.
C)   contractionary fiscal policy.
D)   expansionary fiscal policy.E) B) and D)
F) B) and C)

Question 16

One way fiscal policy affects aggregate demand is:

Accepted Answer

A)   directly through government spending.
B)   directly through tariffs.
C)   directly through taxation.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 17

Rising unemployment and decreased business confidence could be signs that the economy is at the start of a(n) :

Accepted Answer

A)   recession.
B)   boom.
C)   recovery.
D)   expansion.E) B) and C)
F) A) and B)

Question 18

During a recession, government deficits can grow because:

Accepted Answer

A)   government spending often increases as part of an expansionary fiscal policy.
B)   income tax revenues tend to decrease because people are earning less.
C)   sales tax revenues tend to decrease because people are spending less.
D)   All of these are true.E) B) and C)
F) A) and B)

Question 19

When an economy is in an economic boom, discretionary fiscal policy would call for _____________, and the automatic stabilizers would _____________.

Accepted Answer

A)   lowering tax rates; lower tax revenues
B)   lowering tax revenues; lower tax rates
C)   increasing tax rates; increase tax revenues
D)   increasing tax rates; lower tax revenuesE) None of the above
F) B) and C)

Question 20

Increased government spending on unemployment insurance during a recession is an example of:

Accepted Answer

A)   an automatic stabilizer.
B)   discretionary fiscal policy.
C)   expansionary fiscal policy.
D)   contractionary fiscal policy.E) A) and D)
F) None of the above

Exam 13: Fiscal Policy

If the fiscal policy makers aim to increase aggregate demand, they will likely enact:

Correct AnswerverifiedShow Answer

One of the main difficulties with implementing fiscal policy is:

Correct AnswerverifiedShow Answer

Discretionary fiscal policy is:

Correct AnswerverifiedShow Answer

We use the term expansionary fiscal policy when the overall effect of decisions about taxation and spending is to:

Correct AnswerverifiedShow Answer

During a recession, government deficits can grow because:

Correct AnswerverifiedShow Answer

During a severe recession, the government decides to lower its tax rates to give consumers relief, and allow them to pay less in taxes. This is an example of:

Correct AnswerverifiedShow Answer

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Correct AnswerverifiedShow Answer

When an economy is in an economic boom, discretionary fiscal policy would call for _____________, and the automatic stabilizers would _____________.

Correct AnswerverifiedShow Answer

When the government enacts fiscal policy, it:

Correct AnswerverifiedShow Answer

If the government were to increase its spending, it would expect:

Correct AnswerverifiedShow Answer

Economist John Maynard Keynes once said, "In the long run, we are all dead." Keynes was likely:

Correct AnswerverifiedShow Answer

One way fiscal policy affects aggregate demand is:

Correct AnswerverifiedShow Answer

What is a benefit of giving the government freedom to spend more than they receive in taxes and run a deficit?

Correct AnswerverifiedShow Answer

Rising unemployment and decreased business confidence could be signs that the economy is at the start of a(n) :

Correct AnswerverifiedShow Answer

If the economy in the graph shown is currently at point B, and the government enacts contractionary fiscal policy, in the short run the economy will most likely move to point:

Correct AnswerverifiedShow Answer

Increased government spending on unemployment insurance during a recession is an example of:

Correct AnswerverifiedShow Answer

Since 1940 the US Government has generally had a budget:

Correct AnswerverifiedShow Answer

Fiscal policy that the government actively chooses to adopt is called:

Correct AnswerverifiedShow Answer

When fiscal policy makers wish to reduce aggregate demand, they could enact:

Correct AnswerverifiedShow Answer

If interest rates increase, the government debt becomes:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When an economy is in an economic boom, discretionary fiscal policy would call for _, and the automatic stabilizers would _.

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