Question 1

Since 2002,the United States has had:

Accepted Answer

A)   large federal budget surpluses.
B)   large federal budget deficits.
C)   modest trade surpluses.
D)   a rising natural rate of unemployment.E) None of the above
F) B) and C)

Question 2

Financing wartime expenditures by increasing internally held public debt permits a nation to defer a part of the economic cost of war.

Accepted Answer

A) True 
 B)False

Question 3

The financing of a government deficit increases interest rates and,as a result,reduces investment spending.This statement describes:

Accepted Answer

A)   the supply-side effects of fiscal policy.
B)   built-in stability.
C)   the crowding-out effect.
D)   the net export effect.E) B) and C)
F) None of the above

Question 4

Expansionary fiscal policy is so named because it:

Accepted Answer

A)   involves an expansion of the nation's money supply.
B)   necessarily expands the size of government.
C)   is aimed at achieving greater price stability.
D)   is designed to expand real GDP.E) A) and B)
F) A) and C) D

Question 5

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt.  Year 1Year 2Year 3Year 4Year 5Year 6GovernmentSpending‾$450500600640680600Tax Revenues‾$425450500620580620 GDP ‾$2,0003,0004,0005,0004,8005,000\begin{array}{c}\begin{array}{lll}\\	ext {Year 1}\	ext {Year 2}\	ext {Year 3}\	ext {Year 4}\	ext {Year 5}\	ext {Year 6}\end{array}\begin{array}{c}	ext {Government}\\underline{	ext {Spending}}\ \$ 450 \500\600\640\680\600\end{array}\begin{array}{c}\\underline{	ext {Tax Revenues}}\\$ 425 \450 \500 \620 \580 \620\end{array}\begin{array}{c}\\underline{	ext { GDP }} \ \$ 2,000 \3,000 \4,000 \5,000 \4,800 \5,000\end{array}\end{array}Year 1Year 2Year 3Year 4Year 5Year 6​GovernmentSpending​$450500600640680600​Tax Revenues​$425450500620580620​ GDP ​$2,0003,0004,0005,0004,8005,000​​ 
 Refer to the data.If year 1 is the first year of this nation's existence and year 6 is the present year,this nation's public debt is:

Accepted Answer

A)   $275 billion.
B)   $100 billion.
C)   $3,540 billion.
D)   $230 billion. E) None of the above
F) A) and B) A

Question 6

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) All of the above
F) B) and D)

Question 7

The group of three economists appointed by the president to provide fiscal policy recommendations is the:

Accepted Answer

A)   Council of Economic Advisers.
B)   Joint Economic Committee.
C)   Bureau of Economic Analysis.
D)   Federal Reserve Board of Governors.E) A) and C)
F) C) and D)

Question 8

Approximately what percentage of the U.S.public debt is held by foreign individuals and institutions?

Accepted Answer

A)   50 percent.
B)   71 percent.
C)   40 percent.
D)   33 percent.E) A) and B)
F) All of the above

Question 9

The public debt is the accumulation of all deficits and surpluses that have occurred through time.

Accepted Answer

A) True 
 B)False  True

Question 10

Built-in stability is synonymous with discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 11

The United States has experienced both budget surpluses and deficits since 2000.

Accepted Answer

A) True 
 B)False

Question 12

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deficit in 2002 was:

Accepted Answer

A)   the tax cuts of 2001.
B)   spending increases relating to the wars in Afghanistan and Iraq.
C)   the recession of 2001.
D)   the acceleration of inflation in 2001 and 2002.E) A) and C)
F) None of the above

Question 13

Contractionary fiscal policy is so named because it:

Accepted Answer

A)   involves a contraction of the nation's money supply.
B)   necessarily reduces the size of government.
C)   is aimed at reducing aggregate demand and thus achieving price stability.
D)   is expressly designed to expand real GDP.E) All of the above
F) A) and B)

Question 14

The political business cycle refers to the possibility that:

Accepted Answer

A)   incumbent politicians will be reelected regardless of the state of the economy.
B)   politicians will manipulate the economy to enhance their chances of being reelected.
C)   there is more inflation during Democratic administrations than during Republican administrations.
D)   recessions coincide with election years.E) A) and B)
F) A) and C)

Question 15

The cyclically adjusted budget tells us:

Accepted Answer

A)   that in a full-employment economy,the federal budget should be in balance.
B)   that tax revenues should vary inversely with GDP.
C)   what the size of the federal budget deficit or surplus would be if the economy was at full employment.
D)   the actual budget deficit or surplus realized in any given year.E) A) and C)
F) A) and B)

Question 16

The public debt is held as:

Accepted Answer

A)   U.S.securities,corporate bonds,and common stock.
B)   Federal Reserve Notes.
C)   U.S.gold certificates.
D)   Treasury bills,Treasury notes,Treasury bonds,and U.S.savings bonds.E) B) and C)
F) All of the above

Question 17

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

Accepted Answer

A)   Crisis in the mortgage lending market.
B)   Bursting of the dot.com stock market bubble.
C)   Freezing credit markets.
D)   Pessimism originating from financial market turmoil.E) A) and B)
F) A) and C)

Question 18

Fiscal policy is mainly undertaken by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 19

An appropriate fiscal policy for a severe recession is:

Accepted Answer

A)   a decrease in government spending.
B)   a decrease in tax rates.
C)   appreciation of the dollar.
D)   an increase in interest rates.E) B) and C)
F) A) and D)

Question 20

Answer the question on the basis of the following before-tax consumption schedule for a closed economy:   Gross Domestic  Product (GDP) ‾ Consumption (C)  ‾$0$40100120200200300280400360\begin{array}{l}	ext { Gross Domestic }\\underline{	ext { Product (GDP) } } &  \underline{	ext { Consumption (C)  }} \\$0 & \$ 40 \100 & 120 \200 & 200 \300 & 280 \400 & 360\end{array} Gross Domestic  Product (GDP) ​$0100200300400​ Consumption (C)  ​$40120200280360​   Refer to the data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy,we can conclude that the tax:

Accepted Answer

A)   enhances the economy's built-in stability.
B)   reduces the economy's built-in stability.
C)   neither increases nor decreases built-in stability.
D)   increases the MPC and therefore increases the size of the multiplier. E) B) and D)
F) All of the above

Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

Since 2002,the United States has had:

Correct Answer
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Financing wartime expenditures by increasing internally held public debt permits a nation to defer a part of the economic cost of war.

Correct Answer
verified

The financing of a government deficit increases interest rates and,as a result,reduces investment spending.This statement describes:

Correct Answer
verified

Expansionary fiscal policy is so named because it:

Correct Answer
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D

Correct Answer
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A

Correct Answer
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The group of three economists appointed by the president to provide fiscal policy recommendations is the:

Correct Answer
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Approximately what percentage of the U.S.public debt is held by foreign individuals and institutions?

Correct Answer
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The public debt is the accumulation of all deficits and surpluses that have occurred through time.

Correct Answer
verified
True

Built-in stability is synonymous with discretionary fiscal policy.

Correct Answer
verified

The United States has experienced both budget surpluses and deficits since 2000.

Correct Answer
verified

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deficit in 2002 was:

Correct Answer
verified

Contractionary fiscal policy is so named because it:

Correct Answer
verified

The political business cycle refers to the possibility that:

Correct Answer
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The cyclically adjusted budget tells us:

Correct Answer
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The public debt is held as:

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

Correct Answer
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Fiscal policy is mainly undertaken by the Federal Reserve.

Correct Answer
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An appropriate fiscal policy for a severe recession is:

Correct Answer
verified

Correct Answer
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Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

Since 2002,the United States has had:

Correct AnswerverifiedShow Answer

Financing wartime expenditures by increasing internally held public debt permits a nation to defer a part of the economic cost of war.

Correct AnswerverifiedShow Answer

The financing of a government deficit increases interest rates and,as a result,reduces investment spending.This statement describes:

Correct AnswerverifiedShow Answer

Expansionary fiscal policy is so named because it:

Correct AnswerverifiedD

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

The group of three economists appointed by the president to provide fiscal policy recommendations is the:

Correct AnswerverifiedShow Answer

Approximately what percentage of the U.S.public debt is held by foreign individuals and institutions?

Correct AnswerverifiedShow Answer

The public debt is the accumulation of all deficits and surpluses that have occurred through time.

Correct AnswerverifiedTrue

Built-in stability is synonymous with discretionary fiscal policy.

Correct AnswerverifiedShow Answer

The United States has experienced both budget surpluses and deficits since 2000.

Correct AnswerverifiedShow Answer

The immediate primary cause of the swing from federal budget surpluses in 2000 and 2001 to a budget deficit in 2002 was:

Correct AnswerverifiedShow Answer

Contractionary fiscal policy is so named because it:

Correct AnswerverifiedShow Answer

The political business cycle refers to the possibility that:

Correct AnswerverifiedShow Answer

The cyclically adjusted budget tells us:

Correct AnswerverifiedShow Answer

The public debt is held as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fiscal policy is mainly undertaken by the Federal Reserve.

Correct AnswerverifiedShow Answer

An appropriate fiscal policy for a severe recession is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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D

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A

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True

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