Question 1

Exhibit 26-1 2 - S1. B)  the cyclical surplus is equal to S2. C)  the cyclical surplus is equal to S2 - S1. D)  there is no structural surplus. E)  there is a balanced budget." class="answers-bank-image d-inline" rel="preload" >
-If real GDP equals C in Exhibit 26-1,

Accepted Answer

A)   the structural surplus is equal to S2 - S1.
B)   the cyclical surplus is equal to S2.
C)   the cyclical surplus is equal to S2 - S1.
D)   there is no structural surplus.
E)   there is a balanced budget.

Question 2

The fact that taxes and government spending change whenever the state of the economy changes results in

Accepted Answer

A)   more severe recessions and booms.
B)   a more destabilized economy.
C)   the need for more discretionary policy.
D)   less severe recessions and booms.
E)   the need for Federal Reserve intervention.

Question 3

In which of the following years was the debt to GDP ratio the highest?

Accepted Answer

A)   1960
B)   1950
C)   1973
D)   1992
E)   1985

Question 4

In 1986 the debt to GDP ratio was the highest it had been since the end of World War II.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true?

Accepted Answer

A)   In the short run, changes in fiscal policy mainly affect potential GDP.
B)   Fiscal policy's initial impact on real GDP is permanent.
C)   Fiscal policy does not have the potential to reduce the size of economic fluctuations.
D)   Erratic changes in fiscal policy can increase economic fluctuations.
E)   Fiscal policy cannot cause erratic fluctuations in real GDP.

Question 6

In practice, discretionary changes in fiscal policy have offset booms and recessions.

Accepted Answer

A) True 
 B)False

Question 7

State and local government expenditures are

Accepted Answer

A)   about two-thirds as much as the federal government's expenditures.
B)   relatively small when compared to the federal government's expenditures.
C)   about the same amount as the federal government's expenditures.
D)   usually twice as much as the federal government's expenditures.
E)   usually three times as much as the federal government's expenditures.

Question 8

Which of the following types of taxes have been growing rapidly as a share of federal government revenues?

Accepted Answer

A)   Corporate taxes
B)   Sales taxes
C)   Payroll taxes
D)   Income taxes
E)   Property taxes

Question 9

The federal deficit is the total amount of outstanding loans that the U.S. federal government owes.

Accepted Answer

A) True 
 B)False

Question 10

The 2008 and 2009 major fiscal stimulus bills were motivated by the serious economic recession that hit the United States in 2008, and can be classified as "countercyclical."

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true?

Accepted Answer

A)   Though not required by law, the government tends to run a balanced budget year after year.
B)   If there is a budget deficit, the government must borrow to pay for the excess spending.
C)   If there is a budget deficit, the government must ask the Fed to print money to finance excess spending.
D)   By law the federal budget must balance.
E)   If there is a budget deficit, the government must raise taxes.

Question 12

The debt to GDP ratio grows every time there is a deficit.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that, because of a decline in investment expenditures in a hypothetical economy in the year 2011, real GDP follows the path ABCDE in the figure below. If a discretionary policy were used that was timely and not too little or too large, show how the path in the figure would change. Use the IA-AD curve analysis to show the consequence of this discretionary fiscal policy.

Accepted Answer

Figure I below shows that the policy wil...

Question 14

Supporters of policy rules argue that automatic stabilizers are sufficient to reduce the effects of recessions and expansions and have the added advantage of avoiding the lags associated with discretionary policy. Explain, making reference to an aggregate demand inflation diagram, how the automatic stabilizers can influence real GDP and reduce the size of economic fluctuations.

Accepted Answer

Automatic stabilizers are the tax and sp...

Question 15

Which of the following is true about the projected U.S. federal tax revenues and expenditures for 2017?

Accepted Answer

A)   A deficit is projected.
B)   Tax revenues are projected to exceed expenditures by $500 billion.
C)   The largest expenditure in the budget is defense.
D)   All of the above
E)   None of the above

Question 16

Which of the following is not an instrument of fiscal policy?

Accepted Answer

A)   Transfer payments
B)   Government bonds
C)   Income taxes
D)   Sales taxes
E)   Government purchases

Question 17

The Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003 accelerated the tax cuts introduced in the 2001 plan, increased tax rates on capital gains and dividends, and introduced a child tax credit for parents.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not an automatic stabilizer?

Accepted Answer

A)   Social security payments
B)   Unemployment compensation
C)   Taxes
D)   Welfare payments
E)   Military expenditures

Question 19

Tax cuts as part of a countercyclical policy have

Accepted Answer

A)   in most cases been able to offset the effects of a recession.
B)   always been successful.
C)   been able at best to speed up the recovery from recession.
D)   rarely had any positive long-run effect.
E)   never been used.

Question 20

In practice, automatic fiscal policy has helped stabilize the economy.

Accepted Answer

A) True 
 B)False

Exam 14: Fiscal Policy

Tax cuts as part of a countercyclical policy have

Correct Answer
verified

Which of the following is not an instrument of fiscal policy?

Correct Answer
verified

Correct Answer
verified
Figure I below shows that the policy wil...
View Answer

The 2008 and 2009 major fiscal stimulus bills were motivated by the serious economic recession that hit the United States in 2008, and can be classified as "countercyclical."

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

State and local government expenditures are

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

The Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003 accelerated the tax cuts introduced in the 2001 plan, increased tax rates on capital gains and dividends, and introduced a child tax credit for parents.

Correct Answer
verified

Exhibit 26-1 -If real GDP equals C in Exhibit 26-1,

Correct Answer
verified

The federal deficit is the total amount of outstanding loans that the U.S. federal government owes.

Correct Answer
verified

The debt to GDP ratio grows every time there is a deficit.

Correct Answer
verified

Which of the following types of taxes have been growing rapidly as a share of federal government revenues?

Correct Answer
verified

The fact that taxes and government spending change whenever the state of the economy changes results in

Correct Answer
verified

Which of the following is true about the projected U.S. federal tax revenues and expenditures for 2017?

Correct Answer
verified

In which of the following years was the debt to GDP ratio the highest?

Correct Answer
verified

In 1986 the debt to GDP ratio was the highest it had been since the end of World War II.

Correct Answer
verified

In practice, discretionary changes in fiscal policy have offset booms and recessions.

Correct Answer
verified

Correct Answer
verified
Automatic stabilizers are the tax and sp...
View Answer

Which of the following is not an automatic stabilizer?

Correct Answer
verified

In practice, automatic fiscal policy has helped stabilize the economy.

Correct Answer
verified

Exam 14: Fiscal Policy

Tax cuts as part of a countercyclical policy have

Correct AnswerverifiedShow Answer

Which of the following is not an instrument of fiscal policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFigure I below shows that the policy wil...View AnswerShow Answer

The 2008 and 2009 major fiscal stimulus bills were motivated by the serious economic recession that hit the United States in 2008, and can be classified as "countercyclical."

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

State and local government expenditures are

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

The Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003 accelerated the tax cuts introduced in the 2001 plan, increased tax rates on capital gains and dividends, and introduced a child tax credit for parents.

Correct AnswerverifiedShow Answer

Exhibit 26-1 -If real GDP equals C in Exhibit 26-1,

Correct AnswerverifiedShow Answer

The federal deficit is the total amount of outstanding loans that the U.S. federal government owes.

Correct AnswerverifiedShow Answer

The debt to GDP ratio grows every time there is a deficit.

Correct AnswerverifiedShow Answer

Which of the following types of taxes have been growing rapidly as a share of federal government revenues?

Correct AnswerverifiedShow Answer

The fact that taxes and government spending change whenever the state of the economy changes results in

Correct AnswerverifiedShow Answer

Which of the following is true about the projected U.S. federal tax revenues and expenditures for 2017?

Correct AnswerverifiedShow Answer

In which of the following years was the debt to GDP ratio the highest?

Correct AnswerverifiedShow Answer

In 1986 the debt to GDP ratio was the highest it had been since the end of World War II.

Correct AnswerverifiedShow Answer

In practice, discretionary changes in fiscal policy have offset booms and recessions.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAutomatic stabilizers are the tax and sp...View AnswerShow Answer

Which of the following is not an automatic stabilizer?

Correct AnswerverifiedShow Answer

In practice, automatic fiscal policy has helped stabilize the economy.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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verified
Figure I below shows that the policy wil...
View Answer

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Correct Answer
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verified

Correct Answer
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Correct Answer
verified
Automatic stabilizers are the tax and sp...
View Answer

Correct Answer
verified

Correct Answer
verified