Question 1

Suppose that government spending fell by $20 billion with a multiplier of 7.What happened to GDP?

Accepted Answer

It fell by...

Question 2

The long run effect of crowd-out effect is ____________.

Accepted Answer

sm all lev...

Question 3

A budget deficit is the

Accepted Answer

A)  annual excess of government spending over revenue raised by taxes,fees,and charges.
B)  shortfall of Social Security collections toward payment of benefits.
C)  amount by which tax revenues and borrowed funds fall short of government expenditures.
D)  excess of tax revenues over expenditures.
E)  amount by which tax revenues exceed borrowed funds.

Question 4

An increase in the rate of economic growth is likely to

Accepted Answer

A)  increase the federal budget deficit.
B)  decrease the federal budget deficit.
C)  have no effect on the federal budget deficit.
D)  increase the federal budget deficit only if inflation decreases.

Question 5

Statement I: If the federal budget deficit goes down,the national debt will go down.
Statement II: Unless we begin to reduce the national debt,we will probably go bankrupt.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.

Question 6

The best advice you could give to end a depression would be to

Accepted Answer

A)  balance the federal budget.
B)  run budget surpluses.
C)  have the government stimulate aggregate demand so we could spend our way out.
D)  have the government do nothing but wait until the economy righted itself.

Question 7

Discretionary fiscal policy entails

Accepted Answer

A)  automatic changes in spending or taxes that occur as economic conditions change.
B)  changing government spending or tax policy to offset automatic stabilizers.
C)  legislative changes in spending or tax policies.
D)  actions exercised by the President alone in the United States.
E)  wide swings in income and employment when the government expenditure multiplier is small.

Question 8

We have an inflationary gap when

Accepted Answer

A)  equilibrium GDP is greater than full employment GDP.
B)  full employment GDP is greater than equilibrium GDP.
C)  equilibrium GDP is equal to full employment GDP.
D)  None of the choices are correct.

Question 9

There would be no inflationary gap or recessionary gap if _______ were equal to _____.

Accepted Answer

equilibriu...

Question 10

What two fiscal policy measures do you recommend to remove it?

Accepted Answer

The answer of What two fiscal policy measures do you...

Question 11

If the MPC is .9,the multiplier is

Accepted Answer

A)  .1.
B)  .9.
C)  1.
D)  9.
E)  10.

Question 12

Statement I: Rapid economic growth would tend to raise the federal budget deficit.
Statement II: The 1990-91 recession raised the budget deficit over the level it would have otherwise been.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.

Question 13

In the event of a recession,the fiscal policy measures favored by most liberals would involve _______.

Accepted Answer

more gover...

Question 14

There is a recessionary gap when

Accepted Answer

A)  equilibrium GDP is equal to full employment GDP.
B)  equilibrium GDP is smaller than full employment GDP.
C)  equilibrium GDP is larger than full employment GDP.
D)  None of the choices are correct.

Question 15

Which of the following is NOT an example of an automatic stabilizer?

Accepted Answer

A)  Welfare and transfer payments
B)  Taxes on corporate profits
C)  Unemployment insurance
D)  The tax cuts of 1981-1983
E)  A progressive personal income tax

Question 16

When the economy heads into a recession,automatic stabilizers cause

Accepted Answer

A)  taxes and government spending to rise.
B)  the government budget deficit to increase.
C)  taxes and government spending to fall.
D)  national income to increase.

Question 17

If the economy dips into a recession

Accepted Answer

A)  automatic stabilizers will cause tax receipts to fall and transfer payments to rise.
B)  automatic stabilizers will cause tax receipts to rise and transfer payments to fall.
C)  discretionary fiscal policy will generate increased transfer payments and lower tax receipts.
D)  discretionary fiscal policy will reduce government outlays and increase tax receipts.
E)  nothing will happen to the federal budget unless the President and Congress take specific corrective action.

Question 18

Governmental assistance to the unemployed

Accepted Answer

A)  was advocated by classical economists.
B)  is taxed as regular income by the federal government.
C)  is opposed by Keynesian economists.
D)  was abolished under the 1986 Tax Reform Act.
E)  may increase unemployment because it enables the jobless to take more time to look for employment.

Question 19

-Is this an inflationary gap or a recessionary?

Accepted Answer

The answer of 
-Is this an inflationary gap or a...

Question 20

A)Given the information above,if full employment GDP were 2,300,would there be an inflationary gap or a recessionary gap? B)What two fiscal policy measures would you recommend to remove that gap?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> A)recessionary gap;...

Exam 12: Fiscal Policy and the National Debt

When the economy heads into a recession,automatic stabilizers cause

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Suppose that government spending fell by $20 billion with a multiplier of 7.What happened to GDP?

Correct AnswerverifiedIt fell by...View AnswerShow Answer

-Is this an inflationary gap or a recessionary?

Correct AnswerverifiedShow Answer

There would be no inflationary gap or recessionary gap if _______ were equal to _____.

Correct Answerverifiedequilibriu...View AnswerShow Answer

An increase in the rate of economic growth is likely to

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Statement I: If the federal budget deficit goes down,the national debt will go down. Statement II: Unless we begin to reduce the national debt,we will probably go bankrupt.

Correct AnswerverifiedShow Answer

Governmental assistance to the unemployed

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Discretionary fiscal policy entails

Correct AnswerverifiedShow Answer

There is a recessionary gap when

Correct AnswerverifiedShow Answer

In the event of a recession,the fiscal policy measures favored by most liberals would involve _______.

Correct Answerverifiedmore gover...View AnswerShow Answer

Statement I: Rapid economic growth would tend to raise the federal budget deficit. Statement II: The 1990-91 recession raised the budget deficit over the level it would have otherwise been.

Correct AnswerverifiedShow Answer

What two fiscal policy measures do you recommend to remove it?

Correct AnswerverifiedShow Answer

If the MPC is .9,the multiplier is

Correct AnswerverifiedShow Answer

The long run effect of crowd-out effect is ____________.

Correct Answerverifiedsm all lev...View AnswerShow Answer

A budget deficit is the

Correct AnswerverifiedShow Answer

The best advice you could give to end a depression would be to

Correct AnswerverifiedShow Answer

We have an inflationary gap when

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of an automatic stabilizer?

Correct AnswerverifiedShow Answer

A)Given the information above,if full employment GDP were 2,300,would there be an inflationary gap or a recessionary gap? B)What two fiscal policy measures would you recommend to remove that gap?

Correct Answerverified A)recessionary gap;...View AnswerShow Answer

If the economy dips into a recession

Correct AnswerverifiedShow Answer

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It fell by...
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There would be no inflationary gap or recessionary gap if ___ were equal to _.

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equilibriu...
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more gover...
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sm all lev...
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A)recessionary gap;...
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