Question 1

An expansionary fiscal policy can result in

Accepted Answer

A)   higher unemployment rates.
B)   inflation and higher GDP.
C)   lower prices.
D)   a recession.

Question 2

Which statement(s)  is/are TRUE? I. The crowding-out effect can be mitigated if the funds from deficit spending are used for public investment.
II)  The majority of the U.S. national debt is held by the foreign public and is owned by foreign banks, corporations, mutual funds, pension plans, and individuals.
III)  It's always wise for a country to pay off its debt.

Accepted Answer

A)   I only
B)   I and II only
C)   II and III only
D)   I, II, and III only

Question 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)   d

Question 4

If the economy is below full employment and the government uses expansionary fiscal policy in an attempt to reduce unemployment

Accepted Answer

A)   output and the price level will rise.
B)   it will have no effect, as fiscal policy does not work during times of unemployment.
C)   output and the price level will fall.
D)   output will rise, but the price level will fall.

Question 5

The _____ shows that when incentives to work and produce are hampered by a high federal marginal income tax, reducing the marginal tax might actually increase total tax revenue.

Accepted Answer

A)   money supply model
B)   Phillips curve
C)   Laffer curve
D)   aggregate supply-aggregate demand framework

Question 6

The crowding-out effect is most prominent during times of rapid economic growth.

Accepted Answer

A) True 
 B)False

Question 7

Increased government _____ lead(s)  to a larger increase in GDP when compared to the same reduction in _____.

Accepted Answer

A)   spending; taxes
B)   taxes; spending
C)   revenue; government expenditures
D)   expenditures; prices

Question 8

Politicians eagerly use contractionary policies that control inflation, since unemployment is not a concern.

Accepted Answer

A) True 
 B)False

Question 9

The total accumulation of past deficits less surpluses is called the

Accepted Answer

A)   public debt.
B)   national deficit.
C)   public surplus.
D)   national debt.

Question 10

Which item does NOT constrain federal spending?

Accepted Answer

A)   the mortgage interest rate
B)   the amount of bonds the public is willing to purchase
C)   the money supply
D)   tax receipts

Question 11

In the United States, what three entities must agree on spending and taxation policies?

Accepted Answer

A)   the president, the Senate, and the Supreme Court
B)   the president, the House of Representatives, and the Supreme Court
C)   the president, the Senate, and a majority of state governors
D)   the president, the House of Representatives, and the Senate

Question 12

When marginal income taxes become too high, the incentives for individuals to work harder are diminished.

Accepted Answer

A) True 
 B)False

Question 13

Describe the crowding-out effect.

Accepted Answer

When the government runs a deficit, it t...

Question 14

The public debt is the

Accepted Answer

A)   debt held by public corporations.
B)   portion of the national debt that is held by individuals, companies, and pension funds, along with foreign entities and foreign governments.
C)   amount by which government spending exceeds tax revenues in a given year.
D)   amount government agencies owe to other agencies.

Question 15

As a result of the crowding-out effect, interest rates _____ and private sector borrowing _____.

Accepted Answer

A)   increase; increases
B)   decrease; increases
C)   decrease; decreases
D)   increase; decreases

Question 16

When the economy is in equilibrium

Accepted Answer

A)   GDP = C + I.
B)   I + G + X = S + T + M.
C)   Y + C = I.
D)   Y = C/I.

Question 17

_____ are securities with a maturity period of a year or less that sell at a discount.

Accepted Answer

A)   Treasury bills
B)   Treasury notes
C)   Treasury bonds
D)   U.S. savings bonds

Question 18

When the government is spending more than it is receiving in tax revenues, it is

Accepted Answer

A)   running a surplus.
B)   overstepping its authority.
C)   reducing the public debt.
D)   running a deficit.

Question 19

The United States ran a federal budget surplus in 2004, but it had disappeared by 2006.

Accepted Answer

A) True 
 B)False

Question 20

During an economic expansion, automatic stabilizers

Accepted Answer

A)   help to keep the economy from generating inflationary pressures.
B)   add to the growth of GDP.
C)   prevent the economy from growing.
D)   add to inflationary pressures.

Exam 10: Fiscal Policy and Debt

When the economy is in equilibrium

Correct Answer
verified

In the United States, what three entities must agree on spending and taxation policies?

Correct Answer
verified

(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 Answer
verified

Which item does NOT constrain federal spending?

Correct Answer
verified

The crowding-out effect is most prominent during times of rapid economic growth.

Correct Answer
verified

An expansionary fiscal policy can result in

Correct Answer
verified

The United States ran a federal budget surplus in 2004, but it had disappeared by 2006.

Correct Answer
verified

The total accumulation of past deficits less surpluses is called the

Correct Answer
verified

During an economic expansion, automatic stabilizers

Correct Answer
verified

The public debt is the

Correct Answer
verified

Correct Answer
verified

Increased government _ lead(s) to a larger increase in GDP when compared to the same reduction in _.

Correct Answer
verified

When marginal income taxes become too high, the incentives for individuals to work harder are diminished.

Correct Answer
verified

As a result of the crowding-out effect, interest rates _ and private sector borrowing _.

Correct Answer
verified

_____ are securities with a maturity period of a year or less that sell at a discount.

Correct Answer
verified

The _____ shows that when incentives to work and produce are hampered by a high federal marginal income tax, reducing the marginal tax might actually increase total tax revenue.

Correct Answer
verified

Politicians eagerly use contractionary policies that control inflation, since unemployment is not a concern.

Correct Answer
verified

When the government is spending more than it is receiving in tax revenues, it is

Correct Answer
verified

Describe the crowding-out effect.

Correct Answer
verified
When the government runs a deficit, it t...
View Answer

If the economy is below full employment and the government uses expansionary fiscal policy in an attempt to reduce unemployment

Correct Answer
verified

Exam 10: Fiscal Policy and Debt

When the economy is in equilibrium

Correct AnswerverifiedShow Answer

In the United States, what three entities must agree on spending and taxation policies?

Correct AnswerverifiedShow Answer

(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

Which item does NOT constrain federal spending?

Correct AnswerverifiedShow Answer

The crowding-out effect is most prominent during times of rapid economic growth.

Correct AnswerverifiedShow Answer

An expansionary fiscal policy can result in

Correct AnswerverifiedShow Answer

The United States ran a federal budget surplus in 2004, but it had disappeared by 2006.

Correct AnswerverifiedShow Answer

The total accumulation of past deficits less surpluses is called the

Correct AnswerverifiedShow Answer

During an economic expansion, automatic stabilizers

Correct AnswerverifiedShow Answer

The public debt is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Increased government _____ lead(s) to a larger increase in GDP when compared to the same reduction in _____.

Correct AnswerverifiedShow Answer

When marginal income taxes become too high, the incentives for individuals to work harder are diminished.

Correct AnswerverifiedShow Answer

As a result of the crowding-out effect, interest rates _____ and private sector borrowing _____.

Correct AnswerverifiedShow Answer

_____ are securities with a maturity period of a year or less that sell at a discount.

Correct AnswerverifiedShow Answer

The _____ shows that when incentives to work and produce are hampered by a high federal marginal income tax, reducing the marginal tax might actually increase total tax revenue.

Correct AnswerverifiedShow Answer

Politicians eagerly use contractionary policies that control inflation, since unemployment is not a concern.

Correct AnswerverifiedShow Answer

When the government is spending more than it is receiving in tax revenues, it is

Correct AnswerverifiedShow Answer

Describe the crowding-out effect.

Correct AnswerverifiedWhen the government runs a deficit, it t...View AnswerShow Answer

If the economy is below full employment and the government uses expansionary fiscal policy in an attempt to reduce unemployment

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
verified

Increased government _ lead(s) to a larger increase in GDP when compared to the same reduction in _.

Correct Answer
verified

Correct Answer
verified

As a result of the crowding-out effect, interest rates _ and private sector borrowing _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the government runs a deficit, it t...
View Answer

Correct Answer
verified