Question 1

Figure: Laffer Curve 3  (Figure: Laffer Curve 3) A supply-side economist is advocating reducing income tax rates.She is probably assuming that the economy is at point ______ in the graph.

Accepted Answer

A)   a
B)   b
C)   c
D)   dE) B) and C)
F) A) and C)

Question 2

The graph that plots hypothetical tax revenues at various income tax rates is commonly called the:

Accepted Answer

A)   revenue-enhancement curve.
B)   Phillips curve.
C)   Laffer curve.
D)   tax efficiency curve.E) B) and C)
F) All of the above

Question 3

Explain the difference between discretionary and mandatory government spending.What are some examples of each one? Why is the distinction important for fiscal policy?

Accepted Answer

Discretionary spending can change every ...

Question 4

If a government collects $1,400 in tax revenue and spends $1,600,it has:

Accepted Answer

A)   a surplus of $200.
B)   a deficit of $200.
C)   a balanced budget of $200.
D)   a public debt of $200.E) A) and C)
F) A) and B)

Question 5

An economy is operating at long-run equilibrium.What is the most likely result of an aggressive expansionary fiscal policy?

Accepted Answer

A)   no change in long-run GDP and employment
B)   a drop in the unemployment rate
C)   a drop in prices
D)   a rise in long-run employmentE) All of the above
F) None of the above

Question 6

The federal government can finance its debt by all the following measures EXCEPT a(n) :

Accepted Answer

A)   increase in the money supply.
B)   increase in the federal funds rate.
C)   sale of government bonds.
D)   sale of government assets.E) A) and B)
F) All of the above

Question 7

The discretionary spending portion of the federal budget has been growing since the 1960s.

Accepted Answer

A) True 
 B)False

Question 8

Repealing regulations that have more costs than benefits to businesses is one way to increase aggregate supply and economic growth.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions 
Figure: Determining Fiscal Policy 
-(Figure: Determining Fiscal Policy) Expansionary fiscal policies could:

Accepted Answer

A)   move the economy to full employment.
B)   move the economy away from full employment.
C)   lead to a lower price level.
D)   lead to a lower price level and lower unemployment.E) A) and D)
F) B) and D)

Question 10

The progressive income tax and transfer payments are the two main:

Accepted Answer

A)   automatic stabilizers.
B)   monetary policy tools.
C)   long-run aggregate supply management tools.
D)   tools for balancing the budget.E) A) and B)
F) All of the above

Question 11

Which of the following is NOT an element of expansionary fiscal policy?

Accepted Answer

A)   expanding immigration
B)   increasing government spending
C)   cutting taxes
D)   increasing transfer paymentsE) B) and C)
F) All of the above

Question 12

_____ involves increasing government spending,increasing transfer payments,and/or decreasing taxes.

Accepted Answer

A)   Expansionary monetary policy
B)   Expansionary fiscal policy
C)   Contractionary fiscal policy
D)   Contractionary monetary policyE) A) and D)
F) C) and D)

Question 13

Rising productivity will drive increased economic growth and raise the average standard of living,shifting _____ curve to the _____.

Accepted Answer

A)   long-run aggregate supply;right
B)   long-run aggregate supply;left
C)   aggregate demand;left
D)   short run aggregate supply;leftE) B) and C)
F) None of the above

Question 14

Which of the following statements is TRUE?

Accepted Answer

A)   Tax revenues are maximized when the tax rate is 100%.
B)   Not knowing the economy's position on the Laffer curve means the effects of lowering tax rates are uncertain.
C)   Low marginal tax rates have disincentive effects on work effort.
D)   High marginal tax rates increase incentives to work.E) None of the above
F) A) and B)

Question 15

The implementation lag is:

Accepted Answer

A)   usually less than 12 months.
B)   the time it takes policymakers to recognize a problem.
C)   the time it takes for a fiscal policy change to influence the economy.
D)   the shortest of the three fiscal policy lags.E) B) and C)
F) B) and D)

Question 16

Automatic stabilizers are:

Accepted Answer

A)   aspects of the tax code that stabilize tax revenue over the course of a business cycle.
B)   laws passed by Congress that stabilize interest rates.
C)   policies intended to stabilize the price level.
D)   components of the federal budget that counter the effects of the business cycle without explicit intervention by the president or Congress.E) C) and D)
F) A) and D)

Question 17

Which of the following is NOT a form of U.S.public debt?

Accepted Answer

A)   Treasury bills
B)   Treasury notes
C)   stocks
D)   savings bondsE) A) and B)
F) C) and D)

Question 18

The total accumulation of past deficits less surpluses is called the:

Accepted Answer

A)   public debt.
B)   national deficit.
C)   public surplus.
D)   federal budget.E) None of the above
F) B) and C)

Question 19

Suppose a government finances its expansionary fiscal policy by borrowing from the public.Joseph is concerned that this will increase the demand for loanable funds,drive up interest rates,and leave less loanable money available for consumers and businesses.Joseph is concerned about the:

Accepted Answer

A)   boomerang effect.
B)   expansionary countereffect.
C)   ricochet effect.
D)   crowding-out effect.E) A) and B)
F) A) and D)

Question 20

What type of government spending would be most effective in mitigating the crowding-out effect?

Accepted Answer

A)   education subsidies
B)   subsidies to private airports
C)   military spending
D)   increased salaries for the presidential staffE) A) and C)
F) A) and B)

Exam 10: Fiscal Policy and Debt

If a government collects $1,400 in tax revenue and spends $1,600,it has:

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Determining Fiscal Policy -(Figure: Determining Fiscal Policy) Expansionary fiscal policies could:

Correct AnswerverifiedShow Answer

An economy is operating at long-run equilibrium.What is the most likely result of an aggressive expansionary fiscal policy?

Correct AnswerverifiedShow Answer

Repealing regulations that have more costs than benefits to businesses is one way to increase aggregate supply and economic growth.

Correct AnswerverifiedShow Answer

Which of the following is NOT an element of expansionary fiscal policy?

Correct AnswerverifiedShow Answer

Explain the difference between discretionary and mandatory government spending.What are some examples of each one? Why is the distinction important for fiscal policy?

Correct AnswerverifiedDiscretionary spending can change every ...View AnswerShow Answer

The progressive income tax and transfer payments are the two main:

Correct AnswerverifiedShow Answer

Suppose a government finances its expansionary fiscal policy by borrowing from the public.Joseph is concerned that this will increase the demand for loanable funds,drive up interest rates,and leave less loanable money available for consumers and businesses.Joseph is concerned about the:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

_____ involves increasing government spending,increasing transfer payments,and/or decreasing taxes.

Correct AnswerverifiedShow Answer

Automatic stabilizers are:

Correct AnswerverifiedShow Answer

The implementation lag is:

Correct AnswerverifiedShow Answer

Which of the following is NOT a form of U.S.public debt?

Correct AnswerverifiedShow Answer

Figure: Laffer Curve 3 (Figure: Laffer Curve 3) A supply-side economist is advocating reducing income tax rates.She is probably assuming that the economy is at point ______ in the graph.

Correct AnswerverifiedShow Answer

The graph that plots hypothetical tax revenues at various income tax rates is commonly called the:

Correct AnswerverifiedShow Answer

The total accumulation of past deficits less surpluses is called the:

Correct AnswerverifiedShow Answer

The federal government can finance its debt by all the following measures EXCEPT a(n) :

Correct AnswerverifiedShow Answer

What type of government spending would be most effective in mitigating the crowding-out effect?

Correct AnswerverifiedShow Answer

The discretionary spending portion of the federal budget has been growing since the 1960s.

Correct AnswerverifiedShow Answer

Rising productivity will drive increased economic growth and raise the average standard of living,shifting _____ curve to the _____.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Discretionary spending can change every ...
View 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

Rising productivity will drive increased economic growth and raise the average standard of living,shifting _ curve to the _.

Correct Answer
verified