Question 1

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

Accepted Answer

A) True 
 B)False

Question 2

An economist who favored expanded government would recommend

Accepted Answer

A)  tax cuts during recession and reductions in government spending during inflation.
B)  tax increases during recession and tax cuts during inflation.
C)  tax cuts during recession and tax increases during inflation.
D)  increases in government spending during recession and tax increases during inflation.E) A) and D)
F) A) and C)

Question 3

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

Accepted Answer

A)  the opportunity cost of wartime expenditures was borne by the generation that lived during the war.
B)  the Federal government can shift expenditures from military goods to the production of other public goods.
C)  the Federal government has the power to levy taxes to pay its debts.
D)  wartime inflation reduces the relative size of the public debt.E) A) and D)
F) A) and C)

Question 4

The Social Security program is designed to pay

Accepted Answer

A)  current retirees, using funds from their past contributions.
B)  current retirees, using funds from current contributions.
C)  the lower-income groups, using funds collected from high-income groups.
D)  older current workers, using funds from younger current workers.E) A) and B)
F) All of the above

Question 5

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

Accepted Answer

A)  reduce inflationary pressure caused by oil price increases.
B)  curb the overspending by households that contributed to the Great Recession.
C)  bring the federal budget back into balance.
D)  stimulate aggregate demand and employment.E) All of the above
F) C) and D)

Question 6

When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting

Accepted Answer

A)  fiscal policy.
B)  incomes policy.
C)  monetary policy.
D)  employment policy.E) A) and C)
F) B) and D)

Question 7

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

Question 8

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases.Full-employment GDP is $120 billion.To obtain price-level stability under these conditions, the government should

Accepted Answer

A)  increase tax rates and/or reduce government spending.
B)  discourage personal saving by reducing the interest rate on government bonds.
C)  increase government expenditures.
D)  encourage private investment by reducing corporate income taxes.E) None of the above
F) A) and D)

Question 9

A budget surplus means that

Accepted Answer

A)  government expenditures are greater than revenues in a given year.
B)  government revenues are greater than expenditures in a given year.
C)  a nation's exports are greater than its imports.
D)  a nation's imports are greater than its exports.E) B) and D)
F) C) and D)

Question 10

The cyclically adjusted budget deficit for the United States

Accepted Answer

A)  rose to âˆ'7.1 percent of potential GDP in 2009 but has since declined.
B)  was zero in 2009, but the cyclical deficit created by the recession was âˆ'7.1 percent of potential GDP.
C)  changed to a surplus in 2009.
D)  rose to âˆ'10.1 percent of potential GDP in 2009 but has since declined.E) C) and D)
F) B) and D)

Question 11

The portion of the public debt held outside federal agencies and the Federal Reserve is

Accepted Answer

A)  larger than the portion held by federal agencies and the Federal Reserve.
B)  smaller than the portion held by federal agencies and the Federal Reserve.
C)  equally split between U.S.and foreign lenders.
D)  all held by foreign lenders.E) B) and C)
F) A) and C)

Question 12

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 13

In 2015, foreign ownership of the total public debt of the United States was about

Accepted Answer

A)  20 percent.
B)  34 percent.
C)  60 percent.
D)  75 percent.E) A) and B)
F) A) and C)

Question 14

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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

Question 17

To track the public debt over time and understand its significance to the economy, it is best

Accepted Answer

A)  examined relative to budget surpluses.
B)  calculated relative to the money supply.
C)  measured relative to the gross domestic product.
D)  to compare it to imports, exports, and the trade deficit.E) All of the above
F) A) and B)

Question 18

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n)

Accepted Answer

A)  expansionary fiscal policy.
B)  contractionary fiscal policy.
C)  neutral fiscal policy.
D)  high-interest-rate policy.E) B) and C)
F) A) and D)

Question 20

Discretionary fiscal policy is often initiated on the advice of the

Accepted Answer

A)  Congressional Budget Office.
B)  Council of Economic Advisers.
C)  Joint Economic Committee.
D)  Federal Reserve Board.E) None of the above
F) All of the above

Exam 33: Fiscal Policy, Deficits, and Debt

An economist who favored expanded government would recommend

Correct Answer
verified

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n)

Correct Answer
verified

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Correct Answer
verified

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

Correct Answer
verified

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

Correct Answer
verified

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

Correct Answer
verified

Discretionary fiscal policy is often initiated on the advice of the

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

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.

Correct Answer
verified

The portion of the public debt held outside federal agencies and the Federal Reserve is

Correct Answer
verified

To track the public debt over time and understand its significance to the economy, it is best

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

Correct Answer
verified

The cyclically adjusted budget deficit for the United States

Correct Answer
verified

The Social Security program is designed to pay

Correct Answer
verified

Which of the following represents the most expansionary fiscal policy?

Correct Answer
verified

In 2015, foreign ownership of the total public debt of the United States was about

Correct Answer
verified

When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting

Correct Answer
verified

A budget surplus means that

Correct Answer
verified

Exam 33: Fiscal Policy, Deficits, and Debt

An economist who favored expanded government would recommend

Correct AnswerverifiedShow Answer

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP.The government is engaging in a(n)

Correct AnswerverifiedShow Answer

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

Correct AnswerverifiedShow Answer

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

Correct AnswerverifiedShow Answer

Discretionary fiscal policy is often initiated on the advice of the

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

Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.

Correct AnswerverifiedShow Answer

The portion of the public debt held outside federal agencies and the Federal Reserve is

Correct AnswerverifiedShow Answer

To track the public debt over time and understand its significance to the economy, it is best

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

Correct AnswerverifiedShow Answer

The cyclically adjusted budget deficit for the United States

Correct AnswerverifiedShow Answer

The Social Security program is designed to pay

Correct AnswerverifiedShow Answer

Which of the following represents the most expansionary fiscal policy?

Correct AnswerverifiedShow Answer

In 2015, foreign ownership of the total public debt of the United States was about

Correct AnswerverifiedShow Answer

When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting

Correct AnswerverifiedShow Answer

A budget surplus means that

Correct AnswerverifiedShow Answer

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