Question 1

Which of the following is the best example of public investment?

Accepted Answer

A)   salaries of senators and representatives
B)   government expenditures on food assistance programs
C)   construction of highways
D)   funding of regulatory agenciesE) None of the above
F) C) and D)

Question 2

The crowding-out effect will be minimal when the economy is in a severe recession.

Accepted Answer

A) True 
 B)False

Question 3

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

Accepted Answer

Discretionary ﬁscal policy refers to cha...

Question 4

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 percent of real GDP. The government is engaging in a(n)

Accepted Answer

A)   expansionary ﬁscal policy.
B)   contractionary ﬁscal policy.
C)   neutral ﬁscal policy.
D)   low-interest-rate policy.E) None of the above
F) All of the above

Question 5

In 2018, the Federal Reserve and other U.S. (federal)  government agencies held about what percentage of U.S. federal debt?

Accepted Answer

A)   25 percent
B)   60 percent
C)   38 percent
D)   75 percentE) A) and B)
F) A) and C)

Question 6

The real burden of an increase in the public debt

Accepted Answer

A)   may be very small or conceivably zero when the economy is in a severe depression.
B)   will be smaller when full employment exists than when the economy has large quantities of idle resources.
C)   can be shifted to future generations if the debt is internally ﬁnanced.
D)   can best be measured by the dollar increase in the size of the debt.E) A) and D)
F) A) and C)

Question 7

The cyclically adjusted budget refers to

Accepted Answer

A)   the inﬂationary impact that the automatic stabilizers have in a full-employment economy.
B)   that portion of a full-employment GDP that is not consumed in the year it is produced.
C)   the size of the federal government's budgetary surplus or deﬁcit when the economy is operating at full employment.
D)   the number of workers who are underemployed when the level of unemployment is 4 to 5 percent.E) B) and D)
F) None of the above

Question 8

When current government expenditures exceed 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 has a deﬁcit.
C)   ﬁscal policy is contractionary.
D)   the cyclically adjusted budget has a surplus.E) A) and B)
F) A) and C)

Question 9

Accepted Answer

A)   a cyclically adjusted budget deﬁcit.
B)   an actual budget deﬁcit.
C)   an actual budget surplus.
D)   neither a surplus nor deﬁcit in the actual budget.E) All of the above
F) A) and B)

Question 10

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then
that means that the government is pursuing an expansionary ﬁscal policy.

Accepted Answer

A) True 
 B)False

Question 11

The crowding-out effect from government borrowing to ﬁnance the public debt is reduced when

Accepted Answer

A)   the economy is experiencing a period of high inﬂation.
B)   the economy is operating at the full-employment level of output.
C)   public investment complements private investment.
D)   public investment substitutes for private investment.E) A) and B)
F) C) and D)

Question 12

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Accepted Answer

A)   budget lag.
B)   recognition lag.
C)   operational lag.
D)   administrative lag.E) A) and B)
F) A) and C)

Question 13

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following did not contribute directly to the Great Recession?

Accepted Answer

A)   crisis in the mortgage lending market
B)   the bursting of the dot-com stock market bubble
C)   freezing credit markets
D)   pessimism originating from ﬁnancial market turmoilE) C) and D)
F) B) and C)

Question 15

Year  Actual Budget, Percent of GDP  (-deficits, +surpluses)   Cyclically-Adjusted Budget, Percent of GDP  (-deficits, +surpluses)  1002−303−5−24−2−25+2+1\begin{array} { | c | c | c | } \hline 	ext { Year } & \begin{array} { c } 	ext { Actual Budget, Percent of GDP } \	ext { (-deficits, +surpluses)  }\end{array} & \begin{array} { c } 	ext { Cyclically-Adjusted Budget, Percent of GDP } \	ext { (-deficits, +surpluses)  }\end{array} \\hline 1 & 0 & 0 \\hline 2 & - 3 & 0 \\hline 3 & - 5 & - 2 \\hline 4 & - 2 & - 2 \\hline 5 & + 2 & + 1 \\hline\end{array} Year 12345​ Actual Budget, Percent of GDP  (-deficits, +surpluses)  ​0−3−5−2+2​ Cyclically-Adjusted Budget, Percent of GDP  (-deficits, +surpluses)  ​00−2−2+1​​  Refer to the data for a ?ctional economy. The changes in the budget conditions between Year 2 and 3 best re?ect

Accepted Answer

A)   demand-pull in?ation.
B)   an expansionary ?scal policy.
C)   a tax increase.
D)   a contractionary ?scal policy. E) B) and C)
F) All of the above

Question 16

The Great Recession of 2007-09 and the consequent policy response made the

Accepted Answer

A)   actual budget deﬁcit become very close to the cyclically adjusted deﬁcit during that period.
B)   actual budget deﬁcit shrink during that period.
C)   cyclically adjusted deﬁcit grow during that period.
D)   cyclically adjusted budget balance turn positive during that period.E) B) and C)
F) A) and B)

Question 17

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government
Purchases. Full-employment GDP is $120 billion. To obtain price-level stability under these conditions,
The government should

Accepted Answer

A)   increase tax rates and/or reduce government spending.
B)   discourage personal saving by reducing the interest rate on government bonds.
C)   increase government expenditures.
D)   encourage private investment by reducing corporate income taxes.E) A) and B)
F) A) and C)

Question 18

State and local governments are limited in their ability to respond to recessions because of

Accepted Answer

A)   local politics and politicians.
B)   their desire to always run budget surpluses.
C)   the lack of proper economic research and assistance.
D)   constitutional and other requirements to balance their budgets.E) C) and D)
F) B) and C)

Question 19

Refer to the diagram. Which tax system has the least built-in stability?

Accepted Answer

A)    T4T _ { 4 }T4​ 
B)    T3T _ { 3 }T3​ 
C)    T2T _ { 2 }T2​ 
D)    T1T _ { 1 }T1​E) A) and B)
F) A) and C)

Question 20

Explain what is meant by a built-in stabilizer and give two examples.

Accepted Answer

A built-in stabilizer is anything that i...

Exam 13: Fiscal Policy, Deficits, and Debt

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then that means that the government is pursuing an expansionary ﬁscal policy.

Correct Answer
verified

In 2018, the Federal Reserve and other U.S. (federal) government agencies held about what percentage of U.S. federal debt?

Correct Answer
verified

The real burden of an increase in the public debt

Correct Answer
verified

The cyclically adjusted budget refers to

Correct Answer
verified

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

Correct Answer
verified

Explain what is meant by a built-in stabilizer and give two examples.

Correct Answer
verified
A built-in stabilizer is anything that i...
View Answer

The Great Recession of 2007-09 and the consequent policy response made the

Correct Answer
verified

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Correct Answer
verified

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following did not contribute directly to the Great Recession?

Correct Answer
verified

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

Correct Answer
verified
Discretionary ﬁscal policy refers to cha...
View Answer

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 percent of real GDP. The government is engaging in a(n)

Correct Answer
verified

The crowding-out effect from government borrowing to ﬁnance the public debt is reduced when

Correct Answer
verified

$Refer to the diagram. Which tax system has the least built-in stability? A) T _ { 4 } B) T _ { 3 } C) T _ { 2 } D) T _ { 1 }$ Refer to the diagram. Which tax system has the least built-in stability?

Correct Answer
verified

The crowding-out effect will be minimal when the economy is in a severe recession.

Correct Answer
verified

State and local governments are limited in their ability to respond to recessions because of

Correct Answer
verified

Which of the following is the best example of public investment?

Correct Answer
verified

Correct Answer
verified

Exam 13: Fiscal Policy, Deficits, and Debt

If the cyclically adjusted budget has a zero deﬁcit but the actual budget has a $100 billion deﬁcit, then that means that the government is pursuing an expansionary ﬁscal policy.

Correct AnswerverifiedShow Answer

In 2018, the Federal Reserve and other U.S. (federal) government agencies held about what percentage of U.S. federal debt?

Correct AnswerverifiedShow Answer

The real burden of an increase in the public debt

Correct AnswerverifiedShow Answer

The cyclically adjusted budget refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain what is meant by a built-in stabilizer and give two examples.

Correct AnswerverifiedA built-in stabilizer is anything that i...View AnswerShow Answer

The Great Recession of 2007-09 and the consequent policy response made the

Correct AnswerverifiedShow Answer

The time that elapses between the beginning of a recession or an inﬂationary episode and the identiﬁcation of the macroeconomic problem is referred to as a(n)

Correct AnswerverifiedShow Answer

An increase in the cyclical deﬁcits will automatically increase the cyclically adjusted budget deﬁcit.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following did not contribute directly to the Great Recession?

Correct AnswerverifiedShow Answer

Differentiate between discretionary ﬁscal policy and nondiscretionary ﬁscal policy.

Correct AnswerverifiedDiscretionary ﬁscal policy refers to cha...View AnswerShow Answer

Suppose the government purposely changes the economy's cyclically adjusted budget from a deﬁcit of 0 percent of real GDP to a deﬁcit of 3 percent of real GDP. The government is engaging in a(n)

Correct AnswerverifiedShow Answer

The crowding-out effect from government borrowing to ﬁnance the public debt is reduced when

Correct AnswerverifiedShow Answer

Refer to the diagram. Which tax system has the least built-in stability?

Correct AnswerverifiedShow Answer

The crowding-out effect will be minimal when the economy is in a severe recession.

Correct AnswerverifiedShow Answer

State and local governments are limited in their ability to respond to recessions because of

Correct AnswerverifiedShow Answer

Which of the following is the best example of public investment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A built-in stabilizer is anything that i...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Discretionary ﬁscal policy refers to cha...
View Answer

Correct Answer
verified

Correct Answer
verified

$Refer to the diagram. Which tax system has the least built-in stability? A) T _ { 4 } B) T _ { 3 } C) T _ { 2 } D) T _ { 1 }$ Refer to the diagram. Which tax system has the least built-in stability?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified