Question 1

The graph shown displays various economic outcomes.  If the economy is currently at equilibrium B, and the government increases its spending:

Accepted Answer

A)   the level of output will increase.
B)   the economy will experience deflation.
C)   the unemployment rate will increase.
D)   All of these are likely to be true.E) A) and B)
F) C) and D)

Question 2

When an economy is in an economic boom, discretionary fiscal policy would call for _______ and 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) A) and B)
F) None of the above

Question 3

Ricardian equivalence will fail to hold if:

Accepted Answer

A)   consumers increase their spending when they receive a tax rebate check.
B)   consumers save the money they receive from a tax rebate check.
C)   the intended expansionary effects of tax policy do not occur.
D)   None of these are true.E) B) and C)
F) All of the above

Question 4

After the housing bubble popped in 2007, the National Bureau of Economic Research did not officially declare a recession until a year later. This announcement 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 B)
F) A) and C)

Question 5

Which component of GDP will be affected if the government decreases the income tax rate?

Accepted Answer

A)   Consumption
B)   Net exports
C)   Government spending
D)   A change to the income tax rate will not affect any of these components.E) A) and B)
F) B) and C)

Question 6

If the government wished to shift aggregate demand to the right, it might:

Accepted Answer

A)   fund more "shovel-ready" infrastructure projects around the country.
B)   increase income taxes.
C)   pressure the Fed to decrease the money supply.
D)   cut funding for the Environmental Protection Agency.E) A) and B)
F) A) and D)

Question 7

Payments from government accounts to individuals for programs that do not involve a purchase of goods or services are called:

Accepted Answer

A)   discretionary funds.
B)   transfer payments.
C)   grants.
D)   fiscal policy.E) A) and C)
F) B) and D)

Question 8

All else equal, Ricardian equivalence predicts:

Accepted Answer

A)   a low rate of savings in response to a tax cut.
B)   a low multiplier for tax cuts.
C)   a low response rate for incentives provided to local businesses.
D)   a low willingness to change policy in response to economic downturns.E) A) and C)
F) A) and D)

Question 9

The graph shown displays various economic outcomes.  Assuming the economy is currently at equilibrium A, we can conclude:

Accepted Answer

A)   the economy is in a recession.
B)   the economy is producing less than its potential level of output.
C)   there must be unemployment of resources.
D)   All of these are true.E) C) and D)
F) A) and D)

Question 10

Economists express the budget deficit:

Accepted Answer

A)   as a percentage of GDP.
B)   in real terms.
C)   in nominal terms.
D)   as a percentage of total consumption.E) A) and B)
F) B) and C)

Question 11

The graph shown displays various economic outcomes.  At which equilibrium would the government most likely decide to increase its spending?

Accepted Answer

A)   Point C
B)   Point A
C)   Point D
D)   This cannot be answered without more information.E) A) and D)
F) B) and D)

Question 12

When an economy is in a recession, discretionary fiscal policy would call for _______ and automatic stabilizers would _______.

Accepted Answer

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

Question 13

The graph shown displays various economic outcomes.  Assuming the economy is currently at equilibrium A, the government would likely enact _______ fiscal policy in an effort to move aggregate demand to the _______.

Accepted Answer

A)   expansionary; right
B)   contractionary; left
C)   expansionary; left
D)   contractionary; rightE) A) and B)
F) B) and D)

Question 14

A direct cost of public debt is:

Accepted Answer

A)   the interest the government pays people it has borrowed from.
B)   it does not allow the government to be flexible when something unexpected happens.
C)   the government often has to borrow from private banks using high-interest loans.
D)   All of these are directs costs of public debt.E) All of the above
F) B) and D)

Question 15

Consumption depends on:

Accepted Answer

A)   total income.
B)   disposable income.
C)   pre-tax income.
D)   Consumption is unrelated to income.E) A) and B)
F) A) and C)

Question 16

If interest rates increase, the debt becomes:

Accepted Answer

A)   more expensive.
B)   less expensive.
C)   smaller as a share of GDP.
D)   more stable.E) B) and C)
F) A) and D)

Question 17

The government can enact expansionary fiscal policy by:

Accepted Answer

A)   increasing income taxes.
B)   decreasing income taxes.
C)   decreasing government spending.
D)   increasing corporate income taxes.E) A) and B)
F) A) and D)

Question 18

Which of the following is not a cost of government debt?

Accepted Answer

A)   Crowding out of private investment
B)   The ability to spend in response to natural disasters
C)   Increased interest rates
D)   A lowered return on treasury securitiesE) A) and D)
F) All of the above

Question 19

The graph shown displays various economic outcomes.  If the government were to successfully enact expansionary fiscal policy, the economy's equilibrium would most likely move from:

Accepted Answer

A)   A to B.
B)   B to C.
C)   C to D.
D)   D to B.E) None of the above
F) B) and C)

Question 20

What is a benefit of giving the government freedom to run a deficit?

Accepted Answer

A)   It allows the government to be flexible if something unexpected happens.
B)   Government spending does not cause inflation.
C)   Discretionary spending quickly responds to changes in the economy.
D)   The government has precise information on how much spending needs to increase to restore potential output.E) A) and D)
F) None of the above

Exam 13: Fiscalpolicy

When an economy is in a recession, discretionary fiscal policy would call for _______ and automatic stabilizers would _______.

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. Assuming the economy is currently at equilibrium A, the government would likely enact _______ fiscal policy in an effort to move aggregate demand to the _______.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consumption depends on:

Correct AnswerverifiedShow Answer

Which of the following is not a cost of government debt?

Correct AnswerverifiedShow Answer

If interest rates increase, the debt becomes:

Correct AnswerverifiedShow Answer

Economists express the budget deficit:

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the government were to successfully enact expansionary fiscal policy, the economy's equilibrium would most likely move from:

Correct AnswerverifiedShow Answer

After the housing bubble popped in 2007, the National Bureau of Economic Research did not officially declare a recession until a year later. This announcement is an example of:

Correct AnswerverifiedShow Answer

Ricardian equivalence will fail to hold if:

Correct AnswerverifiedShow Answer

The government can enact expansionary fiscal policy by:

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. At which equilibrium would the government most likely decide to increase its spending?

Correct AnswerverifiedShow Answer

Payments from government accounts to individuals for programs that do not involve a purchase of goods or services are called:

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. Assuming the economy is currently at equilibrium A, we can conclude:

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the economy is currently at equilibrium B, and the government increases its spending:

Correct AnswerverifiedShow Answer

All else equal, Ricardian equivalence predicts:

Correct AnswerverifiedShow Answer

A direct cost of public debt is:

Correct AnswerverifiedShow Answer

Which component of GDP will be affected if the government decreases the income tax rate?

Correct AnswerverifiedShow Answer

What is a benefit of giving the government freedom to run a deficit?

Correct AnswerverifiedShow Answer

If the government wished to shift aggregate demand to the right, it might:

Correct AnswerverifiedShow Answer

When an economy is in a recession, discretionary fiscal policy would call for _ and automatic stabilizers would _.

Correct Answer
verified

The graph shown displays various economic outcomes. Assuming the economy is currently at equilibrium A, the government would likely enact _ fiscal policy in an effort to move aggregate demand to the _.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified