Question 1

The effect of a government surplus on the equilibrium level of GDP is substantially the same as

Accepted Answer

A)  a decrease in imports.
B)  an increase in saving.
C)  an increase in consumption.
D)  an increase in investment.E) A) and C)
F) None of the above

Question 2

A Federal budget deficit exists when

Accepted Answer

A)  Federal government assets are less than liabilities in a given year.
B)  Federal government spending exceeds tax revenues in a given year.
C)  Federal government spending is increasing in a given year.
D)  Federal government taxation is decreasing in a given year.E) A) and D)
F) C) and D)

Question 3

The so-called crowding-out effect refers to government spending crowding out private investment spending.

Accepted Answer

A) True 
 B)False

Question 4

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation.If the MPS is 0.25, then it could

Accepted Answer

A)  increase taxes by $16 billion.
B)  increase taxes by $24 billion.
C)  decrease government spending by $10 billion.
D)  decrease government spending by $16 billion.E) All of the above
F) None of the above

Question 5

Which of the following represents the most contractionary fiscal policy?

Accepted Answer

A)  a $30 billion tax cut
B)  a $30 billion increase in government spending
C)  a $30 billion tax increase
D)  a $30 billion decrease in government spending.E) C) and D)
F) A) and C)

Question 6

There is general agreement among economists that a proposed fiscal policy should be evaluated for its

Accepted Answer

A)  contribution to the purpose of "fine-tuning" the economy.
B)  contribution to the growth of exports and imports in the economy.
C)  potential positive and negative effects on long-run productivity growth.
D)  potential positive and negative effects on short-run business indebtedness.E) A) and D)
F) All of the above

Question 7

The total amount of debt owed by the Federal government is represented by the total value of the outstanding

Accepted Answer

A)  U.S.government securities.
B)  Federal Reserve notes.
C)  bank loans and deposits.
D)  stocks and bonds.E) B) and D)
F) A) and D)

Question 8

The Social Security program is a retirement system where payments to retirees come from their previous contributions.

Accepted Answer

A) True 
 B)False

Question 9

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending will

Accepted Answer

A)  cause aggregate demand and GDP to increase.
B)  cause aggregate demand and GDP to decrease.
C)  not affect aggregate demand and GDP.
D)  not cause the budget deficit to increase.E) All of the above
F) A) and B)

Question 10

The last year when there was a surplus in the actual U.S.Federal budget was in

Accepted Answer

A)  2001.
B)  2002.
C)  2003.
D)  2004.E) A) and D)
F) A) and C)

Question 11

The crowding-out effect of expansionary fiscal policy suggests that

Accepted Answer

A)  tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
B)  increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
C)  it is very difficult to have excessive aggregate spending in the U.S.economy.
D)  consumer and investment spending always vary inversely.E) All of the above
F) B) and D)

Question 12

A Federal budget deficit is financed by the

Accepted Answer

A)  government purchase of Treasury securities.
B)  government issuance or sale of Treasury securities.
C)  nation's exports.
D)  private sector's investment spending.E) B) and C)
F) A) and D)

Question 13

Built-in stability is synonymous with discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

The crowding-out effect is

Accepted Answer

A)  strongest when the economy is at full employment.
B)  strongest when the economy is in a deep recession.
C)  weakest when there is demand-pull inflation.
D)  equally strong, regardless of the state of the macroeconomy.E) B) and C)
F) A) and D)

Question 15

In 2015, about percent of the U.S.public debt was held by the U.S.government and Federal Reserve.

Accepted Answer

A)  34
B)  57
C)  62
D)  41E) A) and B)
F) A) and C)

Question 16

Which of the following fiscal policy changes would be the most expansionary?

Accepted Answer

A)  a $40 billion increase in government spending
B)  a $20 billion tax cut and $20 billion increase in government spending
C)  a $10 billion tax cut and $30 billion increase in government spending
D)  a $40 billion tax cutE) A) and C)
F) C) and D)

Question 17

When current government expenditures equal current tax revenues and the economy is achieving full employment,

Accepted Answer

A)  the cyclically adjusted budget has neither a deficit nor a surplus.
B)  the cyclically adjusted budget may have either a deficit or a surplus.
C)  fiscal policy is contractionary.
D)  nominal GDP and real GDP are equal.E) All of the above
F) A) and C)

Question 18

If the U.S.Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)

Accepted Answer

A)  supply-side fiscal policy.
B)  expansionary fiscal policy.
C)  contractionary fiscal policy.
D)  nondiscretionary fiscal policy.E) C) and D)
F) None of the above

Question 19

The American Recovery and Reinvestment Act of 2009 is a clear example of

Accepted Answer

A)  nondiscretionary fiscal policy that made the cyclically adjusted budget become more positive.
B)  nondiscretionary fiscal policy that made the cyclically adjusted budget become more negative.
C)  discretionary fiscal policy that made the cyclically adjusted budget become more positive.
D)  discretionary fiscal policy that made the cyclically adjusted budget become more negative.E) B) and D)
F) A) and C)

Question 20

Which of the following nations had the highest public sector debt as a percentage of GDP in 2015?

Accepted Answer

A)  the United States
B)  Japan
C)  the United Kingdom
D)  GreeceE) A) and C)
F) B) and C)

Exam 33: Fiscal Policy, Deficits, and Debt

In 2015, about percent of the U.S.public debt was held by the U.S.government and Federal Reserve.

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Which of the following fiscal policy changes would be the most expansionary?

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The so-called crowding-out effect refers to government spending crowding out private investment spending.

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The last year when there was a surplus in the actual U.S.Federal budget was in

Correct AnswerverifiedShow Answer

Built-in stability is synonymous with discretionary fiscal policy.

Correct AnswerverifiedShow Answer

In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation.If the MPS is 0.25, then it could

Correct AnswerverifiedShow Answer

The effect of a government surplus on the equilibrium level of GDP is substantially the same as

Correct AnswerverifiedShow Answer

The crowding-out effect of expansionary fiscal policy suggests that

Correct AnswerverifiedShow Answer

There is general agreement among economists that a proposed fiscal policy should be evaluated for its

Correct AnswerverifiedShow Answer

The crowding-out effect is

Correct AnswerverifiedShow Answer

If the U.S.Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)

Correct AnswerverifiedShow Answer

The American Recovery and Reinvestment Act of 2009 is a clear example of

Correct AnswerverifiedShow Answer

A Federal budget deficit is financed by the

Correct AnswerverifiedShow Answer

When current government expenditures equal current tax revenues and the economy is achieving full employment,

Correct AnswerverifiedShow Answer

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending will

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Which of the following nations had the highest public sector debt as a percentage of GDP in 2015?

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The Social Security program is a retirement system where payments to retirees come from their previous contributions.

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Which of the following represents the most contractionary fiscal policy?

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A Federal budget deficit exists when

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The total amount of debt owed by the Federal government is represented by the total value of the outstanding

Correct AnswerverifiedShow Answer

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