Question 1

If the economy is in a recession and the federal government is running a deficit, then an expansion would

Accepted Answer

A)  automatically balance the budget.
B)  automatically increase the deficit.
C)  automatically decrease the deficit.
D)  leave the deficit unchanged.
E)  increase the deficit only if the interest rate rises.F) A) and E)
G) A) and D) C

Question 2

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit ________ or the structural surplus ________.

Accepted Answer

A)  increases; decreases
B)  decreases; increases
C)  increases; increases
D)  decreases; decreases
E)  does not change; does not changeF) None of the above
G) A) and D)

Question 3

A tax on interest income

Accepted Answer

A)  decreases the demand for loanable funds but does not change the real interest rate.
B)  increases the demand for loanable funds and raises the real interest rate.
C)  increases the supply of loanable funds and lowers the real interest rate.
D)  decreases the supply of loanable funds and has no influence on the real interest rate.
E)  has no effect on the demand for loanable funds.F) A) and B)
G) A) and C)

Question 4

Figure 29.3.1
Use the figure below to answer the following questions.
 
-Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion,

Accepted Answer

A)  neither a structural surplus nor a structural deficit exists.
B)  the structural deficit is $60 billion.
C)  the structural deficit is $40 billion.
D)  the structural surplus is $60 billion.
E)  the structural surplus is $40 billion.F) A) and E)
G) A) and C)

Question 5

Figure 29.3.1
Use the figure below to answer the following questions.
 
-Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. Discretionary expansionary fiscal policy would be shown as

Accepted Answer

A)  a movement from left to right along the revenues curve.
B)  a movement from left to right along the outlays curve.
C)  an upward shift of the revenues curve.
D)  an upward shift of the outlays curve.
E)  both A and CF) A) and D)
G) C) and E)

Question 6

During an expansion, revenues

Accepted Answer

A)  and government outlays decrease.
B)  decrease and government outlays increase.
C)  increase and government outlays decrease.
D)  and government outlays increase.
E)  remain constant and government outlays increase.F) A) and B)
G) A) and C)

Question 7

The government of Ricardia's budget lists the following projected revenues and outlays: $25 million in personal income taxes, $15 million in corporate income taxes, $5 million in indirect taxes, $2 million in investment income, $30 million in transfer payments, $12 million in government expenditure, and $8 million in debt interest. Ricardia has a government budget

Accepted Answer

A)  surplus of $3 million.
B)  surplus of $57 million.
C)  surplus of $13 million.
D)  deficit of $13 million.
E)  deficit of $3 million.F) All of the above
G) A) and D)

Question 8

Choose the statement that is incorrect.

Accepted Answer

A)  The federal government debt was 5 percent of GDP in 1970.
B)  The debt-to-GDP ratio increased slightly during the 2008-2009 recession.
C)  The debt-to-GDP ratio increased from 1974 through 1997, and then began to decrease.
D)  The government debt increases when the government has a budget deficit.
E)  As a percentage of real GDP, the federal government debt was greater in 2014 than in 1970.F) C) and E)
G) A) and E)

Question 9

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

Accepted Answer

A)  $10 billion.
B)  $40 billion.
C)  $60 billion.
D)  $50 billion
E)  $20 billion.F) C) and D)
G) All of the above

Question 10

During a recession, revenues

Accepted Answer

A)  and government outlays decrease.
B)  decrease and government outlays increase.
C)  increase and government outlays decrease.
D)  and government outlays increase.
E)  remain constant and government outlays increase.F) C) and D)
G) A) and B)

Question 11

Consider all the effects of fiscal policy. An income tax cut

Accepted Answer

A)  increases both real GDP and the price level.
B)  increases real GDP but decreases the price level.
C)  increases real GDP but leaves the price level unchanged.
D)  increases real GDP and the price level may rise or fall.
E)  does not change real GDP or the price level.F) A) and C)
G) C) and E)

Question 12

Which of the following is not a source of government revenues?

Accepted Answer

A)  personal income taxes
B)  transfer payments
C)  corporate income taxes
D)  indirect taxes
E)  investment incomeF) A) and B)
G) A) and E)

Question 13

All of the following statements are true except

Accepted Answer

A)  the three components of government outlays are transfer payments, expenditures on goods and services, and debt interest.
B)  debt interest has been steadily increasing since 1960.
C)  expenditures on goods and services have a downward trend.
D)  outlays increased steadily from 1971 through 1985.
E)  transfer payments decreased sharply during the 1990s.F) A) and B)
G) C) and D)

Question 14

The main components of government revenues are

Accepted Answer

A)  transfer payments, investment income, and indirect taxes.
B)  personal income taxes, corporate income taxes, indirect taxes, and investment income.
C)  debt interest, expenditures on goods and services, and income taxes.
D)  corporate income taxes, indirect taxes, and transfer payments.
E)  debt interest, corporate income taxes, and income taxes.F) B) and D)
G) A) and C)

Question 15

Which of the following is a government outlay?

Accepted Answer

A)  personal income taxes
B)  investment income
C)  debt interest
D)  indirect taxes
E)  corporate income taxesF) None of the above
G) C) and D) C

Question 16

Discretionary fiscal policy

Accepted Answer

A)  requires action by Parliament.
B)  is triggered by the state of the economy.
C)  involves only a change in government outlays and no change in revenues.
D)  involves only a change in personal income tax rates.
E)  occurs during recessions but not during expansions.F) A) and D)
G) D) and E)

Question 17

Automatic fiscal policy

Accepted Answer

A)  requires action by Parliament.
B)  is triggered by the state of the economy.
C)  involves only a change in government outlays and no change in revenues.
D)  involves only a change in personal income tax rates.
E)  occurs during recessions but not during expansions.F) A) and D)
G) C) and D)

Question 18

The largest source of revenues for the federal government is

Accepted Answer

A)  transfer payments.
B)  expenditures on goods and services.
C)  personal income taxes.
D)  corporate income taxes.
E)  indirect taxes such as the GST.F) A) and B)
G) A) and C) C

Question 19

Consider the economy of NoTax, where the government expenditure multiplier is 2.5. If the government desires to shift the AD curve rightward by $5 billion, the correct increase in government expenditure is

Accepted Answer

A)  $2 billion.
B)  $2.5 billion.
C)  $3 billion.
D)  $7.5 billion.
E)  $8.33 billion.F) B) and E)
G) All of the above

Question 20

Government debt is

Accepted Answer

A)  equal to revenues minus outlays.
B)  always increasing.
C)  a phenomena that occurs only during times of war.
D)  the total amount of government borrowing.
E)  the result of a rising price level.F) B) and C)
G) A) and B)

Exam 29: Fiscal Policy

If the economy is in a recession and the federal government is running a deficit, then an expansion would

Correct Answer
verified
C

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit or the structural surplus .

Correct Answer
verified

A tax on interest income

Correct Answer
verified

Figure 29.3.1 Use the figure below to answer the following questions. -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion,

Correct Answer
verified

Figure 29.3.1 Use the figure below to answer the following questions. -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. Discretionary expansionary fiscal policy would be shown as

Correct Answer
verified

During an expansion, revenues

Correct Answer
verified

Correct Answer
verified

Choose the statement that is incorrect.

Correct Answer
verified

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

Correct Answer
verified

During a recession, revenues

Correct Answer
verified

Consider all the effects of fiscal policy. An income tax cut

Correct Answer
verified

Which of the following is not a source of government revenues?

Correct Answer
verified

All of the following statements are true except

Correct Answer
verified

The main components of government revenues are

Correct Answer
verified

Which of the following is a government outlay?

Correct Answer
verified
C

Discretionary fiscal policy

Correct Answer
verified

Automatic fiscal policy

Correct Answer
verified

The largest source of revenues for the federal government is

Correct Answer
verified
C

Consider the economy of NoTax, where the government expenditure multiplier is 2.5. If the government desires to shift the AD curve rightward by $5 billion, the correct increase in government expenditure is

Correct Answer
verified

Government debt is

Correct Answer
verified

Exam 29: Fiscal Policy

If the economy is in a recession and the federal government is running a deficit, then an expansion would

Correct AnswerverifiedC

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit ________ or the structural surplus ________.

Correct AnswerverifiedShow Answer

A tax on interest income

Correct AnswerverifiedShow Answer

Figure 29.3.1 Use the figure below to answer the following questions. -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion,

Correct AnswerverifiedShow Answer

Figure 29.3.1 Use the figure below to answer the following questions. -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. Discretionary expansionary fiscal policy would be shown as

Correct AnswerverifiedShow Answer

During an expansion, revenues

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Choose the statement that is incorrect.

Correct AnswerverifiedShow Answer

If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

Correct AnswerverifiedShow Answer

During a recession, revenues

Correct AnswerverifiedShow Answer

Consider all the effects of fiscal policy. An income tax cut

Correct AnswerverifiedShow Answer

Which of the following is not a source of government revenues?

Correct AnswerverifiedShow Answer

All of the following statements are true except

Correct AnswerverifiedShow Answer

The main components of government revenues are

Correct AnswerverifiedShow Answer

Which of the following is a government outlay?

Correct AnswerverifiedC

Discretionary fiscal policy

Correct AnswerverifiedShow Answer

Automatic fiscal policy

Correct AnswerverifiedShow Answer

The largest source of revenues for the federal government is

Correct AnswerverifiedC

Consider the economy of NoTax, where the government expenditure multiplier is 2.5. If the government desires to shift the AD curve rightward by $5 billion, the correct increase in government expenditure is

Correct AnswerverifiedShow Answer

Government debt is

Correct AnswerverifiedShow Answer

Correct Answer
verified
C

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit or the structural surplus .

Correct Answer
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C

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C

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