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Chapter 13

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Section 1

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Countercyclical discretionary fiscal policy calls for: A. surpluses during both recessions and periods of demand-pull inflation B. deficits during both recessions and periods of demand-pull inflation C. surpluses during recessions and deficits during periods of demand-pull inflation D. deficits during recessions and surpluses during periods of demand-pull inflation

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Mar 1, 2020

Cards (20)

Section 1

(20 cards)

Countercyclical discretionary fiscal policy calls for: A. surpluses during both recessions and periods of demand-pull inflation B. deficits during both recessions and periods of demand-pull inflation C. surpluses during recessions and deficits during periods of demand-pull inflation D. deficits during recessions and surpluses during periods of demand-pull inflation

Front

D. deficits during recessions and surpluses during periods of demand-pull inflation

Back

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? A. reductions in federal tax rates on personal and corporate income B. postponement of a highway construction program C. a congressional proposal to incur a federal surplus to be used for the retirement of public debt D. reductions in agricultural subsidies and veterans' benefits

Front

A. reductions in federal tax rates on personal and corporate income

Back

The amount by which government expenditures exceed revenues during a particular year is the: A. full employment B. budget deficit C. GDP gap D. public debt

Front

B. budget deficit

Back

Which of the following best describes the idea of a political business cycle? A. fiscal policy will result in an alternation budget deficits and surpluses B. politicians are more willing to cut taxes and increase government spending than they are to do the reverse C. politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections D. despite good intentions, various timing lags will cause fiscal policy to reinforce the business cycle

Front

C. politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections

Back

The largest proportion of the U.S. public debt is held by: A. the Federal Reserve System B. foreign individuals and institutions C. the U.S. public (individuals, businesses, financial institutions, and government) D. U.S. government agencies

Front

C. the U.S. public (individuals, businesses, financial institutions, and government)

Back

The federal budget deficit is found by: A. subtracting government revenues from the noninvestment-type government spending in a particular year B. cumulating the difference between government spending and tax revenues over all years since the nation's founding C. subtracting government tax revenues from government spending in a particular year D. subtracting government tax revenues plus government borrowing form government spending in a particular year

Front

C. subtracting government tax revenues from government spending in a particular year

Back

The crowding-out effect of expansionary fiscal policy suggests that: A. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment B. consumer and investment spending always vary inversely C. tax increases are paid primarily out of saving and therefore are not an effective fiscal device D. it is very difficult to have excessive aggregate spending in the U.S. economy

Front

A. increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment

Back

An appropriate fiscal policy for a severe recession is: A. a decrease in government spending B. appreciation of the dollar C. an increase in interest rates D. a decrease in tax rates

Front

D. a decrease in tax rates

Back

An economist who favors smaller government would recommend: A. tax increases during recession and tax cuts during inflation B. tax cuts during recession and tax increases during inflation C. increases in government spending during recession and tax increases during inflation D. tax cuts during recession and reductions in government spending during inflation

Front

D. tax cuts during recession and reductions in government spending during inflation

Back

According to Congressional Budget Office (CBO) projections: A. budget deficits are expected to give way to surpluses by the year 2017 B. Social Security will become insolvent by 2017 C. budget deficits are expected to remain large for the next several years D. expiration of tax cuts in 2015 will cause the budget deficit to rise to record highs by 2017

Front

C. budget deficits are expected to remain large for the next several years

Back

Since 2002, the U.S. has had: A. modest trade surpluses B. large federal budget surpluses C. large federal budget deficits D. a rising natural rate of unemployment

Front

C. large federal budget deficits

Back

Fiscal policy refers to the: A. altering of the interest rate to change aggregate demand B. deliberate changes in government spending and taxes to achieve greater equality in the distribution of income C. fact that equal increase in government spending and taxation will be contractionary D. deliberate changes in government spending and taxes to stabilize domestic output, employment and the price level

Front

D. deliberate changes in government spending and taxes to stabilize domestic output, employment and the price level

Back

The American Recovery and ReinvestmentAct of 2009: A. implemented a $787 billion package of tax cuts and government expenditure increases B. created a $700 billion rescue package for financial institutions C. Cut taxes by $152 billion, distributed primarily as rebate checks to taxpayers D. substantially lowered interest rates in an attempt to stimulate investment spending

Front

A. implemented a $787 billion package of tax cuts and government expenditure increases

Back

The cyclically adjusted budget refers to: A. the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment B. the number of workers who are underemployed when the level of unemployment is 4 to 5 percent C. the inflationary impact that the automatic stabilizers have in a full-employment economy D. that portion of a full-employment GDP that is not consumed in the year it is produced

Front

A. the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment

Back

Expansionary fiscal policy is so named because it: A. necessarily expands the size of government B. is aimed at achieving greater price stability C. involves an expansion of the nation's money supply D. is design to expand real GDP

Front

D. is design to expand real GDP

Back

If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by: A. decreasing taxes by $25 billion B. decreasing taxes by $100 billion C. increasing government spending by $25 billion D. increasing government spending by $80 billion

Front

A. decreasing taxes by $25 billion

Back

Contractionary fiscal policy is so named because it: A. is expressly designed to expand real GDP B. involves a contraction of the nation's money supply C. is aimed at reducing aggregate demand and thus achieving price stability D. necessarily reduces the size of government

Front

C. is aimed at reducing aggregate demand and thus achieving price stability

Back

Suppose the government cuts taxes to keep the economy's cyclically adjusted budget in balance when the economy is expanding. The government is engaging in a(n): A. neutral fiscal policy B. expansionary fiscal policy C. contractionary fiscal policy D. low-interest-rate policy

Front

A. neutral fiscal policy

Back

(Last Word) Which of the following would not help to relieve the Social Security and Medicare shortfalls? A. increasing the retirement age for collecting Social Security and Medicare benefits B. reducing Social Security and Medicare benefits for wealthier individuals C. extending the Social Security tax to a higher level of earnings D. restricting immigration of skilled working-age adults

Front

D. restricting immigration of skilled working-age adults

Back

The public debt is held by: A. treasury bills, treasury notes, treasury bonds, and U.S. savings bonds B. U.S. securities, corporate bonds, and common stock C. U.S. gold certificates D. Federal Reserve Notes

Front

A. treasury bills, treasury notes, treasury bonds, and U.S. savings bonds

Back