Question 1

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Accepted Answer

A)  full-employment or structural deficit of $20 billion.
B)  cyclical deficit of $20 billion.
C)  cyclical surplus of $20 billion.
D)  full-employment deficit of zero.E) B) and D)
F) B) and C)

Question 2

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The budget will entail a deficit:

Accepted Answer

A)  at all levels of GDP.
B)  at any level of GDP above $400.
C)  at any level of GDP below $400.
D)  only when GDP is stable.E) A) and C)
F) A) and D)

Question 3

The impact of an expansionary fiscal policy may be strengthened if it crowds out some private investment spending.

Accepted Answer

A) True 
 B)False

Question 4

The full-employment budget measures what the Federal budget deficit or surplus would be at full employment output with existing tax and spending decisions.

Accepted Answer

A) True 
 B)False

Question 5

The key to assessing the direction of discretionary fiscal policy is to observe changes in the full-employment deficit.

Accepted Answer

A) True 
 B)False

Question 6

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 .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) A) and D)

Question 7

In 2011, the level of taxation (the average tax rate)  required to pay interest on the public debt was about:

Accepted Answer

A)  2 percent of GDP.
B)  12 percent of GDP.
C)  26 percent of GDP.
D)  57 percent of GDP.E) B) and D)
F) None of the above

Question 8

An expansionary fiscal policy is shown as a:

Accepted Answer

A)  rightward shift in the economy's aggregate demand curve.
B)  movement along an existing aggregate demand curve.
C)  leftward shift in the economy's aggregate supply curve.
D)  leftward shift in the economy's aggregate demand curve.E) B) and C)
F) A) and D)

Question 9

(1)  The composite index of leading indicators turns downward for three consecutive months; (2)  Economists reach agreement that the economy is moving into a recession; (3)  A tax cut is proposed in Parliament; (4)  The tax cut is passed by Parliament; (5)  Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.Refer to the above information.The operational lag of fiscal policy is reflected in events:

Accepted Answer

A)  1 and 2.
B)  2 and 3.
C)  3 and 4.
D)  4 and 5.E) A) and D)
F) B) and D)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment and actual GDP are each $400 billion, government can balance its budget by:

Accepted Answer

A)  increasing T by $40 billion.
B)  reducing G by $20 billion.
C)  reducing T by $20 billion.
D)  increasing T by $10 billion and reducing G by $20 billion.E) B) and D)
F) None of the above

Question 12

In the above diagram, tax revenues vary:

Accepted Answer

A)  directly with the level of GDP.
B)  inversely with the level of GDP.
C)  directly with the level of government spending.
D)  inversely with the level of government spending.E) A) and B)
F) A) and C)

Question 13

A net export effect may partially reinforce an expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

In a certain year the aggregate demand 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 $200 billion.To obtain full employment under these conditions the government should:

Accepted Answer

A)  encourage personal saving by increasing the interest rate on government bonds.
B)  decrease government expenditures.
C)  reduce tax rates and increase government spending.
D)  discourage private investment by increasing corporate income taxes.E) A) and B)
F) All of the above

Exam 13: B: Fiscal Policy, Deficits, Surpluses, and Debt

In the above diagram, tax revenues vary:

Correct Answer
verified

The full-employment budget measures what the Federal budget deficit or surplus would be at full employment output with existing tax and spending decisions.

Correct Answer
verified

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

Correct Answer
verified

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The budget will entail a deficit:

Correct Answer
verified

An expansionary fiscal policy is shown as a:

Correct Answer
verified

A net export effect may partially reinforce an expansionary fiscal policy.

Correct Answer
verified

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment and actual GDP are each $400 billion, government can balance its budget by:

Correct Answer
verified

The key to assessing the direction of discretionary fiscal policy is to observe changes in the full-employment deficit.

Correct Answer
verified

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 .25, then it could:

Correct Answer
verified

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Correct Answer
verified

The impact of an expansionary fiscal policy may be strengthened if it crowds out some private investment spending.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In 2011, the level of taxation (the average tax rate) required to pay interest on the public debt was about:

Correct Answer
verified

Exam 13: B: Fiscal Policy, Deficits, Surpluses, and Debt

In the above diagram, tax revenues vary:

Correct AnswerverifiedShow Answer

The full-employment budget measures what the Federal budget deficit or surplus would be at full employment output with existing tax and spending decisions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The budget will entail a deficit:

Correct AnswerverifiedShow Answer

An expansionary fiscal policy is shown as a:

Correct AnswerverifiedShow Answer

A net export effect may partially reinforce an expansionary fiscal policy.

Correct AnswerverifiedShow Answer

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment and actual GDP are each $400 billion, government can balance its budget by:

Correct AnswerverifiedShow Answer

The key to assessing the direction of discretionary fiscal policy is to observe changes in the full-employment deficit.

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 .25, then it could:

Correct AnswerverifiedShow Answer

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Correct AnswerverifiedShow Answer

The impact of an expansionary fiscal policy may be strengthened if it crowds out some private investment spending.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2011, the level of taxation (the average tax rate) required to pay interest on the public debt was about:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified