Question 1

After the housing bubble popped in 2007, Congress did not pass a stimulus bill until February 2009. This is an example of:

Accepted Answer

A)   an information lag.
B)   a formulation lag.
C)   an implementation lag.
D)   a direction lag.E) A) and C)
F) A) and D)

Question 2

The graph shown displays various economic outcomes.  If the economy is currently at equilibrium D, to bring the economy back to its long-run equilibrium the government might:

Accepted Answer

A)   increase spending.
B)   increase income taxes.
C)   decrease tax credits.
D)   All of these would move the economy back to its long-run equilibrium from point D.E) B) and D)
F) C) and D)

Question 3

The total amount of money that a government owes at any one point in time is called:

Accepted Answer

A)   a budget deficit.
B)   a budget surplus.
C)   public debt.
D)   national surplus.E) C) and D)
F) None of the above

Question 4

In a booming economy, fiscal policy automatically becomes _______ as tax rates _______ and welfare payments _______.

Accepted Answer

A)   contractionary; rise; fall
B)   expansionary; rise; fall
C)   contractionary; fall; rise
D)   expansionary; fall; riseE) None of the above
F) B) and C)

Question 5

The U.S. government generally finances its debt by:

Accepted Answer

A)   selling U.S. securities.
B)   printing money.
C)   borrowing directly from the Fed.
D)   borrowing directly from large banks.E) A) and C)
F) None of the above

Question 6

During times of economic expansion, spending on unemployment insurance:

Accepted Answer

A)   decreases, since more people are able to find work.
B)   increases, since wages typically rise during expansions.
C)   stays the same, as government spending is unaffected by the business cycle.
D)   depends on whether or not the government implements discretionary fiscal policy.E) All of the above
F) C) and D)

Question 7

Jasper has been working a lot of overtime during the most current economic expansion. As a result, his income is high enough for him to move from the 12 percent tax bracket to the 22 percent tax bracket. The increased amount Jasper pays to the government is an example of:

Accepted Answer

A)   discretionary fiscal policy slowing the economy.
B)   an automatic stabilizer slowing the economy.
C)   discretionary fiscal policy encouraging economic activity.
D)   automatic stabilizers encouraging economic activity.E) A) and B)
F) B) and C)

Question 8

Public debt represents:

Accepted Answer

A)   cumulative shortfalls in the government budget.
B)   only the deficits the government is currently repaying.
C)   what the government owes to foreign lenders.
D)   what the government owes to domestic lenders.E) B) and C)
F) B) and D)

Question 9

Fiscal policy can:

Accepted Answer

A)   influence the economy in the short run.
B)   bring the economy back to its long run equilibrium faster than it can correct itself.
C)   cause inflation.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 10

Since 1940, the U.S. government has generally had a:

Accepted Answer

A)   budget surplus.
B)   balanced budget.
C)   budget padded by reserve sources of funding.
D)   budget deficit.E) None of the above
F) B) and C)

Question 11

If the economy is currently at equilibrium D, we can conclude that the:

Accepted Answer

A)   economy is expanding.
B)   government will enact contractionary fiscal policy.
C)   unemployment rate is very low.
D)   All of these are likely to be true.E) All of the above
F) C) and D)

Question 12

If the government increases the income tax rate _______, shifting aggregate demand to the _______.

Accepted Answer

A)   consumption will decrease; left
B)   net exports will increase; right
C)   investment will increase; right
D)   government spending will increase; rightE) A) and B)
F) B) and C)

Question 13

The consequence of expansionary fiscal policy is:

Accepted Answer

A)   inflation.
B)   deflation.
C)   a greater level of potential output.
D)   a lower level of potential output.E) C) and D)
F) A) and B)

Question 14

The amount of time it takes for fiscal policy to have an impact on the economy creates a(n)  _______ lag.

Accepted Answer

A)   information
B)   formulation
C)   implementation
D)   directionE) B) and D)
F) All of the above

Question 15

An indirect cost of government debt is that it can:

Accepted Answer

A)   distort the credit market and slow economic growth.
B)   distort incentives, making people less willing to enter the labor market.
C)   cause unemployment to rise above the natural rate.
D)   All of these are indirect costs of government debt.E) A) and C)
F) All of the above

Question 16

Which of the following scenarios is an example of an automatic stabilizer?

Accepted Answer

A)   Increased unemployment rates cause the government to pay out more in unemployment insurance.
B)   Tax revenues increase due to a rise in nominal income during an economic expansion.
C)   Unemployment rates are reduced during an economic expansion and so government spending on TANF payments decreases.
D)   All of these scenarios exemplify automatic stabilizers.E) A) and B)
F) A) and D)

Question 17

If the government increases the income tax rate, consumers will have _______ to spend and will _______ their consumption.

Accepted Answer

A)   less; reduce
B)   more; reduce
C)   less; increase
D)   more; increaseE) C) and D)
F) All of the above

Question 18

Automatic stabilizers are:

Accepted Answer

A)   taxes and government spending that affect fiscal policy without specific action from policymakers.
B)   fiscal policies that the government chooses to adopt.
C)   expansionary fiscal policies.
D)   Keynesian policies.E) A) and C)
F) C) and D)

Question 19

If the government cuts funding for public schools, it is enacting:

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 C)

Question 20

If the government decreases the income tax rate:

Accepted Answer

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

Exam 13: Fiscalpolicy

Fiscal policy can:

Correct AnswerverifiedShow Answer

Public debt represents:

Correct AnswerverifiedShow Answer

The U.S. government generally finances its debt by:

Correct AnswerverifiedShow Answer

Automatic stabilizers are:

Correct AnswerverifiedShow Answer

Since 1940, the U.S. government has generally had a:

Correct AnswerverifiedShow Answer

<p><span style="color:#FF8C00;"> If the economy is currently at equilibrium D, we can conclude that the:

Correct AnswerverifiedShow Answer

Jasper has been working a lot of overtime during the most current economic expansion. As a result, his income is high enough for him to move from the 12 percent tax bracket to the 22 percent tax bracket. The increased amount Jasper pays to the government is an example of:

Correct AnswerverifiedShow Answer

In a booming economy, fiscal policy automatically becomes _______ as tax rates _______ and welfare payments _______.

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the economy is currently at equilibrium D, to bring the economy back to its long-run equilibrium the government might:

Correct AnswerverifiedShow Answer

During times of economic expansion, spending on unemployment insurance:

Correct AnswerverifiedShow Answer

If the government cuts funding for public schools, it is enacting:

Correct AnswerverifiedShow Answer

The total amount of money that a government owes at any one point in time is called:

Correct AnswerverifiedShow Answer

An indirect cost of government debt is that it can:

Correct AnswerverifiedShow Answer

If the government increases the income tax rate, consumers will have _______ to spend and will _______ their consumption.

Correct AnswerverifiedShow Answer

The consequence of expansionary fiscal policy is:

Correct AnswerverifiedShow Answer

The amount of time it takes for fiscal policy to have an impact on the economy creates a(n) _______ lag.

Correct AnswerverifiedShow Answer

If the government increases the income tax rate _______, shifting aggregate demand to the _______.

Correct AnswerverifiedShow Answer

After the housing bubble popped in 2007, Congress did not pass a stimulus bill until February 2009. This is an example of:

Correct AnswerverifiedShow Answer

Which of the following scenarios is an example of an automatic stabilizer?

Correct AnswerverifiedShow Answer

If the government decreases the income tax rate:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In a booming economy, fiscal policy automatically becomes ___ as tax rates _ and welfare payments _____.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the government increases the income tax rate, consumers will have _ to spend and will _ their consumption.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the government increases the income tax rate _, shifting aggregate demand to the _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified