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Exam 13: Fiscal Policy

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Question 101

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The largest component of the fiscal imbalance is

A) Social Security.
B) Medicare.
C) Defense spending.
D) none of the above

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Question 102

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A budget surplus occurs when government

A) outlays exceeds tax revenues.
B) tax revenues exceeds outlays.
C) tax revenues equals outlays.
D) tax revenues equal social security expenditures.

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Question 103

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Taxes and government expenditures that,without need for additional government action,change in response to changes in the level of economic activity are examples of

$\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Government } \\\text { tax revenues } \\\text { (billions of } \\\text { dollars) }\end{array} & \begin{array} { c } \text { Government } \\\text { expenditures } \\\text { (billions of } \\\text { dollars) }\end{array} \\\hline 1 & 240 & 240 \\\hline 2 & 250 & 245 \\\hline 3 & 260 & 255 \\\hline 4 & 300 & 320 \\\hline 5 & 325 & 340 \\\hline\end{array}$ -What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

Suppose that real GDP equals potential GDP,but the government believes that the economy is in a below full-employment equilibrium.As a result,the government increases its expenditure on goods and services.In response to the government's fiscal policy,

The Laffer curve is the relationship between

The ________ the interest rate,the ________ the present value of a given future amount.

An increase in taxes on labor income decreases potential GDP.

-In the above figure,if actual GDP = $15 trillion,there is a budget ________ equal to ________.

What is the largest source of revenue for the federal government?

The purpose of the Employment Act of 1946 was to

Comparing the U.S.budget position for 2012 to the rest of the world,we see that as a percentage of GDP,the ________ than in most other countries.

If the government's budget is in surplus even when the economy is at full employment,the surplus is said to be

Between 2000 and 2005,Finland increased its tax on interest income. As a result,the supply curve for loanable funds shifted ________ and the tax wedge ________.

Expenditures such as Social Security benefits,farm subsidies and grants are considered

$\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Government } \\\text { tax revenues } \\\text { (billions of } \\\text { dollars) }\end{array} & \begin{array} { c } \text { Government } \\\text { expenditures } \\\text { (billions of } \\\text { dollars) }\end{array} \\\hline 1 & 240 & 240 \\\hline 2 & 250 & 245 \\\hline 3 & 260 & 255 \\\hline 4 & 300 & 320 \\\hline 5 & 325 & 340 \\\hline\end{array}$ -What is the amount of the surplus or deficit incurred in year 2 by the government shown in the above table?

An increase in the tax on interest income ________ the supply of loanable funds and ________ the equilibrium investment.

If a tax cut increases people's labor supply,then

Automatic fiscal policy is at work if,as real GDP increases,________.

-In the above figure,if the economy is initially at point D and taxes are cut,if potential GDP does not change then the economy will move to point