Question 1

The most likely way the public debt burdens future generations, if at all, is by

Accepted Answer

A)  reducing the current level of investment.
B)  causing future unemployment.
C)  causing deflation.
D)  reducing real interest rates.

Question 2

In 2015, the U.S.federal debt held by the public was

Accepted Answer

A)  held largely by foreign governments.
B)  about four times as large as the GDP.
C)  about twice as large as the GDP.
D)  about 75 percent of the size of the GDP.

Question 3

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.

Question 4

In the later part of 2009, something historic happened relative to Social Security; for the first time,

Accepted Answer

A)  Social Security revenues became zero.
B)  Social Security contributions fell short of payouts.
C)  Social Security payouts did not increase.
D)  the Social Security Trust Fund ran out of funds.

Question 5

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.

Question 6

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

Accepted Answer

A) True 
 B)False

Question 7

Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

Accepted Answer

A) True 
 B)False

Question 8

Expansionary fiscal policy will tend to reduce the budget deficit.

Accepted Answer

A) True 
 B)False

Question 9

The two reasons why bankruptcy is a false concern about the public debt are

Accepted Answer

A)  government spending and taxation.
B)  refinancing and taxation.
C)  investment and refinancing.
D)  saving and investment.

Question 10

Answer the question on the basis of the following sequence of events involving fiscal policy: (1)  The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession.(2)  Economists reach agreement that the economy is moving into a recession.(3)  A tax cut is proposed in Congress.(4)  The tax cut is passed by Congress and signed by the president.(5)  Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.The operational lag of fiscal policy is reflected in event(s)

Accepted Answer

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

Question 11

As measured by the cyclically adjusted budget, the U.S.government engaged in a contractionary fiscal policy in 2005 and 2006.

Accepted Answer

A) True 
 B)False

Question 12

(Last Word)  Which of the following would not help to relieve the Social Security and Medicare shortfalls?

Accepted Answer

A)  extending the Social Security tax to a higher level of earnings
B)  restricting immigration of skilled working-age adults
C)  increasing the retirement age for collecting Social Security and Medicare benefits
D)  reducing Social Security and Medicare benefits for wealthier individuals

Question 13

When the U.S.economy reached full employment in 2007, the cyclically adjusted deficit that year was âˆ'1.3 percent of GDP.From this information, we know that the

Accepted Answer

A)  actual budget deficit must have been very close to 0 percent of GDP.
B)  government implemented a contractionary fiscal policy that year.
C)  actual budget deficit must have been very close to âˆ'1.3 percent of GDP.
D)  government implemented a more expansionary fiscal policy from 2006 to 2007.

Question 14

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Accepted Answer

A)  reducing government expenditures by $12 billion.
B)  reducing government expenditures by $60 billion.
C)  increasing taxes by $15 billion.
D)  increasing taxes by $20 billion.

Question 15

Discretionary fiscal policy will stabilize the economy most when

Accepted Answer

A)  deficits are incurred during recessions and surpluses during inflations.
B)  the budget is balanced each year.
C)  deficits are incurred during inflations and surpluses during recessions.
D)  budget surpluses are continuously incurred.

Question 16

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the

Accepted Answer

A)  Federal Reserve.
B)  budget deficit.
C)  budget surplus.
D)  public debt.

Question 17

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information, it

Accepted Answer

A)  can be concluded that the economy was faced with serious inflation in 2009.
B)  cannot be determined whether the government engaged in expansionary or contractionary fiscal policy in 2009.
C)  can be concluded that fiscal policy was contractionary in 2009.
D)  can be concluded that fiscal policy was expansionary in 2009.

Question 18

If the cyclically adjusted budget shows a deficit of zero and the actual budget shows a deficit of about $150 billion, it can be concluded that there is

Accepted Answer

A)  built-in stability.
B)  a cyclical deficit.
C)  an expansionary fiscal policy.
D)  a contractionary fiscal policy.

Question 19

A major reason that the public debt cannot bankrupt the federal government is because

Accepted Answer

A)  the public debt is mostly held by foreigners.
B)  the federal government has the Social Security Trust Fund.
C)  the public debt can be easily refinanced by issuing new bonds.
D)  the federal government can draw on its gold reserves.

Question 20

A tax reduction of a specific amount will be more expansionary the

Accepted Answer

A)  smaller is the economy's MPC.
B)  larger is the economy's MPC.
C)  smaller is the economy's multiplier.
D)  less is the economy's built-in stability.

Exam 33: Fiscal Policy, Deficits, and Debt

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

Correct Answer
verified

Since 2002, the United States has had

Correct Answer
verified

In 2015, the U.S.federal debt held by the public was

Correct Answer
verified

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Correct Answer
verified

When the U.S.economy reached full employment in 2007, the cyclically adjusted deficit that year was âˆ'1.3 percent of GDP.From this information, we know that the

Correct Answer
verified

The most likely way the public debt burdens future generations, if at all, is by

Correct Answer
verified

In the later part of 2009, something historic happened relative to Social Security; for the first time,

Correct Answer
verified

If the cyclically adjusted budget shows a deficit of zero and the actual budget shows a deficit of about $150 billion, it can be concluded that there is

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

Correct Answer
verified

The two reasons why bankruptcy is a false concern about the public debt are

Correct Answer
verified

As measured by the cyclically adjusted budget, the U.S.government engaged in a contractionary fiscal policy in 2005 and 2006.

Correct Answer
verified

(Last Word) Which of the following would not help to relieve the Social Security and Medicare shortfalls?

Correct Answer
verified

A tax reduction of a specific amount will be more expansionary the

Correct Answer
verified

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information, it

Correct Answer
verified

Expansionary fiscal policy will tend to reduce the budget deficit.

Correct Answer
verified

Discretionary fiscal policy will stabilize the economy most when

Correct Answer
verified

A major reason that the public debt cannot bankrupt the federal government is because

Correct Answer
verified

Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

Correct Answer
verified

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the

Correct Answer
verified

Exam 33: Fiscal Policy, Deficits, and Debt

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

Correct AnswerverifiedShow Answer

Since 2002, the United States has had

Correct AnswerverifiedShow Answer

In 2015, the U.S.federal debt held by the public was

Correct AnswerverifiedShow Answer

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

Correct AnswerverifiedShow Answer

When the U.S.economy reached full employment in 2007, the cyclically adjusted deficit that year was âˆ'1.3 percent of GDP.From this information, we know that the

Correct AnswerverifiedShow Answer

The most likely way the public debt burdens future generations, if at all, is by

Correct AnswerverifiedShow Answer

In the later part of 2009, something historic happened relative to Social Security; for the first time,

Correct AnswerverifiedShow Answer

If the cyclically adjusted budget shows a deficit of zero and the actual budget shows a deficit of about $150 billion, it can be concluded that there is

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

Correct AnswerverifiedShow Answer

The two reasons why bankruptcy is a false concern about the public debt are

Correct AnswerverifiedShow Answer

As measured by the cyclically adjusted budget, the U.S.government engaged in a contractionary fiscal policy in 2005 and 2006.

Correct AnswerverifiedShow Answer

(Last Word) Which of the following would not help to relieve the Social Security and Medicare shortfalls?

Correct AnswerverifiedShow Answer

A tax reduction of a specific amount will be more expansionary the

Correct AnswerverifiedShow Answer

The actual budget deficit of the federal government in 2009 was about $1.4 trillion.On the basis of this information, it

Correct AnswerverifiedShow Answer

Expansionary fiscal policy will tend to reduce the budget deficit.

Correct AnswerverifiedShow Answer

Discretionary fiscal policy will stabilize the economy most when

Correct AnswerverifiedShow Answer

A major reason that the public debt cannot bankrupt the federal government is because

Correct AnswerverifiedShow Answer

Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

Correct AnswerverifiedShow Answer

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the

Correct AnswerverifiedShow Answer

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