Question 1

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Accepted Answer

A)   cyclical
B)   implicit
C)   discretionary
D)   nondiscretionaryE) All of the above
F) A) and D)

Question 2

Accepted Answer

A)   cyclically adjusted budget surplus.
B)   actual budget deﬁcit.
C)   cyclically adjusted budget deﬁcit.
D)   actual budget surplus.E) A) and B)
F) All of the above

Question 3

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

Accepted Answer

A)   the tax cuts of 2001.
B)   spending increases relating to the wars in Afghanistan and Iraq.
C)   the recession of 2001.
D)   the acceleration of inﬂation in 2001 and 2002.E) None of the above
F) A) and B)

Question 4

If government increases the size of its cyclically adjusted surplus, we can

Accepted Answer

A)   assume that government is causing interest rates to rise.
B)   not determine government's impact on the economy without also knowing the status of the actual budget.
C)   assume that government is having a contractionary effect on the economy.
D)   assume that government is having an expansionary effect on the economy.E) A) and B)
F) A) and C)

Question 5

The set of ﬁscal policies that would be most contractionary would be a(n)

Accepted Answer

A)   increase in government spending and taxes.
B)   decrease in government spending and taxes.
C)   increase in government spending and a decrease in taxes.
D)   decrease in government spending and an increase in taxes.E) B) and C)
F) C) and D)

Question 6

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Accepted Answer

A)   ﬁscal policy turned more expansionary.
B)   ﬁscal policy turned more contractionary.
C)   GDP increased.
D)   GDP decreased.E) B) and D)
F) A) and C)

Question 7

Since 2002, the United States has had

Accepted Answer

A)   large federal budget surpluses.
B)   large federal budget deﬁcits.
C)   modest trade surpluses.
D)   a rising natural rate of unemployment.E) A) and D)
F) None of the above

Question 8

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Accepted Answer

A) True 
 B)False

Question 9

The group of three economists who provide ﬁscal policy recommendations to the president is the

Accepted Answer

A)   Council of Economic Advisers.
B)   Joint Economic Committee.
C)   Bureau of Economic Analysis.
D)   Federal Reserve Board of Governors.E) A) and B)
F) B) and C)

Question 10

Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

Accepted Answer

A)   increased by more than $100 billion.
B)   increased by less than $100 billion.
C)   increased by $100 billion.
D)   not increased.E) A) and C)
F) All of the above

Question 11

The Social Security program is a retirement system where payments to retirees come from their
previous contributions.

Accepted Answer

A) True 
 B)False

Question 12

One timing problem in using ﬁscal policy to counter a recession is the "administrative lag" that occurs between the

Accepted Answer

A)   start of the recession and the time it takes to recognize that the recession has started.
B)   start of a predicted recession and the actual start of the recession.
C)   time ﬁscal action is taken and the time that the action has its effect on the economy.
D)   time the need for the ﬁscal action is recognized and the time that the action is taken.E) A) and B)
F) None of the above

Question 13

In 2017, the public debt in the U.S. on a per capita basis was about

Accepted Answer

A)   $100,000.
B)   $38,000.
C)   $95,000.
D)   $62,000.E) B) and C)
F) A) and D)

Question 14

Which of the following is not an important problem associated with the public debt?

Accepted Answer

A)   Payments of interest on the debt lead to greater income inequality.
B)   Interest payments on the debt tend to reduce economic incentives to work and invest.
C)   Government borrowing to ﬁnance the debt may lead to too much private investment.
D)   Payment of interest on the debt held by foreigners sends real resources abroad.E) All of the above
F) B) and C)

Question 15

The crowding-out effect arises when

Accepted Answer

A)   government lends in the money market, thus decreasing interest rates.
B)   government borrows in the money market, thus decreasing interest rates.
C)   government lends in the money market, thus increasing interest rates.
D)   government borrows in the money market, thus causing an increase in interest rates.E) A) and B)
F) All of the above

Question 16

The last year when there was a surplus in the actual U.S. Federal budget was in

Accepted Answer

A)   2001.
B)   2002.
C)   2003.
D)   2004.E) B) and D)
F) B) and C)

Question 17

The public debt is the amount of money that

Accepted Answer

A)   state and local governments owe to the federal government.
B)   Americans owe to foreigners.
C)   the federal government owes to holders of U.S. securities.
D)   the federal government owes to taxpayers.E) B) and C)
F) A) and C)

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 and actual GDP are each $400 billion, this economy will
Realize a

Accepted Answer

A)   cyclically adjusted deﬁcit of $20 billion.
B)   cyclical deﬁcit of $20 billion.
C)   cyclical surplus of $20 billion.
D)   cyclically adjusted deﬁcit of zero.E) A) and B)
F) A) and C)

Question 19

Which of the following represents the most contractionary ﬁscal policy?

Accepted Answer

A)   a $30 billion tax cut
B)   a $30 billion increase in government spending
C)   a $30 billion tax increase
D)   a $30 billion decrease in government spendingE) A) and D)
F) C) and D)

Question 20

Government  Spending  Tax Revenues  GDP  Year 1 $800$825$4,000 Year 2 8508504,200 Year 3 9008754,350 Year 4 9509004,500 Year 5 1,0009254,600\begin{array} { | c | c | c | c | } \hline & \begin{array} { c } 	ext { Government } \	ext { Spending }\end{array} & 	ext { Tax Revenues } & 	ext { GDP } \\hline 	ext { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \\hline 	ext { Year 2 } & 850 & 850 & 4,200 \\hline 	ext { Year 3 } & 900 & 875 & 4,350 \\hline 	ext { Year 4 } & 950 & 900 & 4,500 \\hline 	ext { Year 5 } & 1,000 & 925 & 4,600 \\hline\end{array} Year 1  Year 2  Year 3  Year 4  Year 5 ​ Government  Spending ​$8008509009501,000​ Tax Revenues $825850875900925​ GDP $4,0004,2004,3504,5004,600​​  The table contains budget information for a hypothetical economy. All data are in billions of dollars. The budget de?cit was $75 billion in

Accepted Answer

A)   Year 2.
B)   Year 3.
C)   Year 4.
D)   Year 5. E) A) and C)
F) B) and C)

Exam 13: Fiscal Policy, Deficits, and Debt

One timing problem in using ﬁscal policy to counter a recession is the "administrative lag" that occurs between the

Correct Answer
verified

The group of three economists who provide ﬁscal policy recommendations to the president is the

Correct Answer
verified

Correct Answer
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Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

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 and actual GDP are each $400 billion, this economy will Realize a

Correct Answer
verified

The last year when there was a surplus in the actual U.S. Federal budget was in

Correct Answer
verified

The crowding-out effect arises when

Correct Answer
verified

The public debt is the amount of money that

Correct Answer
verified

In 2017, the public debt in the U.S. on a per capita basis was about

Correct Answer
verified

Which of the following represents the most contractionary ﬁscal policy?

Correct Answer
verified

The set of ﬁscal policies that would be most contractionary would be a(n)

Correct Answer
verified

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

Correct Answer
verified

Since 2002, the United States has had

Correct Answer
verified

Correct Answer
verified

If government increases the size of its cyclically adjusted surplus, we can

Correct Answer
verified

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Correct Answer
verified

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Correct Answer
verified

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Correct Answer
verified

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

Correct Answer
verified

Which of the following is not an important problem associated with the public debt?

Correct Answer
verified

Exam 13: Fiscal Policy, Deficits, and Debt

One timing problem in using ﬁscal policy to counter a recession is the "administrative lag" that occurs between the

Correct AnswerverifiedShow Answer

The group of three economists who provide ﬁscal policy recommendations to the president is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that if there were no crowding out, an increase in government spending would increase GDP by $100 billion. If there had been partial crowding out, however, then GDP would have

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 and actual GDP are each $400 billion, this economy will Realize a

Correct AnswerverifiedShow Answer

The last year when there was a surplus in the actual U.S. Federal budget was in

Correct AnswerverifiedShow Answer

The crowding-out effect arises when

Correct AnswerverifiedShow Answer

The public debt is the amount of money that

Correct AnswerverifiedShow Answer

In 2017, the public debt in the U.S. on a per capita basis was about

Correct AnswerverifiedShow Answer

Which of the following represents the most contractionary ﬁscal policy?

Correct AnswerverifiedShow Answer

The set of ﬁscal policies that would be most contractionary would be a(n)

Correct AnswerverifiedShow Answer

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deﬁcit in 2002 was

Correct AnswerverifiedShow Answer

Since 2002, the United States has had

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If government increases the size of its cyclically adjusted surplus, we can

Correct AnswerverifiedShow Answer

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ ﬁscal policy.

Correct AnswerverifiedShow Answer

The ﬂexibility of the price level tends to dampen the multiplier effect of ﬁscal policy.

Correct AnswerverifiedShow Answer

The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deﬁcit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

Correct AnswerverifiedShow Answer

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

Correct AnswerverifiedShow Answer

Which of the following is not an important problem associated with the public debt?

Correct AnswerverifiedShow Answer

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