Question 1

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce
each other.

Accepted Answer

A) True 
 B)False

Question 2

Accepted Answer

A)   expansionary ﬁscal policy.
B)   a major recession.
C)   contractionary ﬁscal policy.
D)   severe demand-pull inﬂation.E) A) and C)
F) B) and C)

Question 3

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or
increase taxes to pay the debt.

Accepted Answer

A) True 
 B)False

Question 4

The goal of expansionary ﬁscal policy is to increase

Accepted Answer

A)   the price level.
B)   aggregate supply.
C)   real GDP.
D)   unemployment.E) C) and D)
F) B) and D)

Question 5

The more progressive the tax system, the

Accepted Answer

A)   less is the built-in stability for the economy.
B)   greater is the built-in stability for the economy.
C)   less is the effect of crowding out on the economy.
D)   greater is the severity of business ﬂuctuations on the economy.E) C) and D)
F) A) and D)

Question 6

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government
Spending by

Accepted Answer

A)   $10 billion.
B)   $20 billion.
C)   $31.25 billion.
D)   $40.50 billion.E) A) and B)
F) All of the above

Question 7

Discretionary ﬁscal policy is often initiated on the advice of the

Accepted Answer

A)   Congressional Budget Oﬃce.
B)   Council of Economic Advisers.
C)   Joint Economic Committee.
D)   Federal Reserve Board.E) None of the above
F) A) and B)

Question 8

Describe the four substantive issues with the public debt.

Accepted Answer

The four substantive issues are: income ...

Question 9

The payment of interest on the public debt in the United States mildly increases income inequality.

Accepted Answer

A) True 
 B)False

Question 10

The so-called negative taxes are better known as

Accepted Answer

A)   government spending.
B)   transfer payments.
C)   built-in stabilizers.
D)   ﬁscal multipliers.E) All of the above
F) C) and D)

Question 11

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Accepted Answer

A)   increases during a period of recession, rather than prosperity.
B)   is primarily for capital-type goods.
C)   is ﬁnanced by borrowing.
D)   is ﬁnanced by taxation.E) All of the above
F) A) and C)

Question 12

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It
Can be concluded that from Year 1 to Year 2,

Accepted Answer

A)   real GDP decreased.
B)   real GDP increased.
C)   full employment was attained.
D)   ﬁscal policy became less expansionary.E) A) and B)
F) A) and C)

Question 13

List the 4 types of U.S. government securities.

Accepted Answer

The four types of government securities ...

Question 14

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

Accepted Answer

In a progressive tax system, the average...

Question 15

Tax increases and government spending cuts by state governments during recessions often reduce the
expansionary impact of ﬁscal policy by the federal government.

Accepted Answer

A) True 
 B)False

Question 16

In 2018, interest payments on the public debt, as a percentage of GDP, were about

Accepted Answer

A)   1.8 percent.
B)   22 percent.
C)   52 percent.
D)   12 percent.E) None of the above
F) A) and D)

Question 17

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending
Will

Accepted Answer

A)   increase, thus partially offsetting the ﬁscal policy.
B)   increase, thus partially reinforcing the ﬁscal policy.
C)   decrease, thus partially offsetting the ﬁscal policy.
D)   decrease, thus partially reinforcing the ﬁscal policy.E) A) and B)
F) A) and D)

Question 18

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It
Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

Accepted Answer

A)   proportional.
B)   progressive.
C)   contractionary.
D)   expansionary.E) B) and C)
F) C) and D)

Question 19

Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

Accepted Answer

A)    T4T _ { 4 }T4​ 
B)    T3T _ { 3 }T3​ 
C)    T2T _ { 2 }T2​ 
D)    T1T _ { 1 }T1​E) B) and C)
F) None of the above

Question 20

What is the Council of Economic Advisers?

Accepted Answer

The Council of Economic Advisors (CEA) i...

Exam 13: Fiscal Policy, Deficits, and Debt

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Correct Answer
verified

$Refer to the diagram. Which tax system will generate the largest cyclical de?cits? A) T _ { 4 } B) T _ { 3 } C) T _ { 2 } D) T _ { 1 }$ Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

Correct Answer
verified

Discretionary ﬁscal policy is often initiated on the advice of the

Correct Answer
verified

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

Correct Answer
verified
In a progressive tax system, the average...
View Answer

The more progressive the tax system, the

Correct Answer
verified

List the 4 types of U.S. government securities.

Correct Answer
verified
The four types of government securities ...
View Answer

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It Can be concluded that from Year 1 to Year 2,

Correct Answer
verified

The so-called negative taxes are better known as

Correct Answer
verified

Correct Answer
verified

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of ﬁscal policy by the federal government.

Correct Answer
verified

The goal of expansionary ﬁscal policy is to increase

Correct Answer
verified

What is the Council of Economic Advisers?

Correct Answer
verified
The Council of Economic Advisors (CEA) i...
View Answer

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce each other.

Correct Answer
verified

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or increase taxes to pay the debt.

Correct Answer
verified

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government Spending by

Correct Answer
verified

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

Correct Answer
verified

In 2018, interest payments on the public debt, as a percentage of GDP, were about

Correct Answer
verified

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending Will

Correct Answer
verified

The payment of interest on the public debt in the United States mildly increases income inequality.

Correct Answer
verified

Describe the four substantive issues with the public debt.

Correct Answer
verified
The four substantive issues are: income ...
View Answer

Exam 13: Fiscal Policy, Deficits, and Debt

Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending

Correct AnswerverifiedShow Answer

Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

Correct AnswerverifiedShow Answer

Discretionary ﬁscal policy is often initiated on the advice of the

Correct AnswerverifiedShow Answer

List the three types of tax systems, and brieﬂy state how each system relates to GDP.

Correct AnswerverifiedIn a progressive tax system, the average...View AnswerShow Answer

The more progressive the tax system, the

Correct AnswerverifiedShow Answer

List the 4 types of U.S. government securities.

Correct AnswerverifiedThe four types of government securities ...View AnswerShow Answer

In Year 1, the actual budget deﬁcit was $150 billion and the cyclically adjusted deﬁcit was $125 billion. In Year 2, the actual budget deﬁcit was $130 billion and the cyclically adjusted deﬁcit was $125 billion. It Can be concluded that from Year 1 to Year 2,

Correct AnswerverifiedShow Answer

The so-called negative taxes are better known as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of ﬁscal policy by the federal government.

Correct AnswerverifiedShow Answer

The goal of expansionary ﬁscal policy is to increase

Correct AnswerverifiedShow Answer

What is the Council of Economic Advisers?

Correct AnswerverifiedThe Council of Economic Advisors (CEA) i...View AnswerShow Answer

A decrease in government spending and a cut in taxes would be a pair of ﬁscal policies that reinforce each other.

Correct AnswerverifiedShow Answer

A large public debt would not bankrupt the federal government, because it can reﬁnance the debt or increase taxes to pay the debt.

Correct AnswerverifiedShow Answer

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government Spending by

Correct AnswerverifiedShow Answer

In Year 1, the actual budget deﬁcit was $200 billion and the cyclically adjusted deﬁcit was $150 billion. In Year 2, the actual budget deﬁcit was $225 billion and the cyclically adjusted deﬁcit was $175 billion. It Can be concluded that ﬁscal policy from Year 1 to Year 2 became more

Correct AnswerverifiedShow Answer

In 2018, interest payments on the public debt, as a percentage of GDP, were about

Correct AnswerverifiedShow Answer

The United States is experiencing a recession and Congress decides to adopt an expansionary ﬁscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending Will

Correct AnswerverifiedShow Answer

The payment of interest on the public debt in the United States mildly increases income inequality.

Correct AnswerverifiedShow Answer

Describe the four substantive issues with the public debt.

Correct AnswerverifiedThe four substantive issues are: income ...View AnswerShow Answer

Correct Answer
verified

$Refer to the diagram. Which tax system will generate the largest cyclical de?cits? A) T _ { 4 } B) T _ { 3 } C) T _ { 2 } D) T _ { 1 }$ Refer to the diagram. Which tax system will generate the largest cyclical de?cits?

Correct Answer
verified

Correct Answer
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Correct Answer
verified
In a progressive tax system, the average...
View Answer

Correct Answer
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Correct Answer
verified
The four types of government securities ...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The Council of Economic Advisors (CEA) i...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The four substantive issues are: income ...
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