Exam 13: Fiscal Policy

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During normal times,discretionary fiscal...

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A) an increase in aggregate demand equivalent to the full impact of all of the coupons redeemable.
B) no increase in aggregate demand due to the Ricardian equivalence theorem.
C) no increase in aggregate demand because there would be no direct expenditure offset.
D) an increase in aggregate demand but not equivalent to the full impact of all of the coupons redeemed due to some direct expenditure offset.

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A) automatic changes in government expenditures and interest rates that achieve certain national economic goals.
B) deliberate changes in government expenditures or taxes in order to achieve certain national economic goals.
C) used to achieve full employment by changing monetary growth targets.
D) changes in support for research and education in order to achieve certain national economic goals.

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A) supply-side economics.
B) demand-side economics.
C) the Ricardian equivalence theorem.
D) consistent with crowding out.

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A) increase aggregate demand to the full-employment level of real GDP.
B) shift the aggregate supply curve out.
C) align aggregate demand and aggregate supply.
D) increase consumption.

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A) government spending for the war effort
B) 401(k) retirement program
C) unemployment compensation
D) government budgeting for education

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A) $100 billion
B) $125 billion
C) $200 billion
D) $400 billion

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D

A) a discretionary fiscal stabilizer.
B) an automatic fiscal stabilizer.
C) a monetary stabilizer.
D) an automatic monetary stabilizer.

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B

A) increase spending less than the simplest Keynesian model would predict.
B) increase spending more than the simplest Keynesian model would predict.
C) reduce taxes rather than increase government spending.
D) both reduce taxes and reduce spending to be able to achieve full employment.

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A) Increases in the government budget deficit will not affect aggregate demand.
B) Exports will not be considered part of aggregate demand.
C) Investment spending will not be considered part of aggregate demand.
D) The long-run aggregate supply curve will not be vertical.

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A) cost of living adjustments to Social Security payments
B) unemployment benefits
C) a temporary tax rebate
D) all of the above

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A) an inflationary gap.
B) a recessionary gap.
C) a deflationary gap.
D) full employment.

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D

A) there is never a long enough time lag.
B) the economy is almost always at full employment.
C) the President may have different goals than Congress.
D) various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve.

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A) inflationary gap
B) recessionary gap
C) equilibrium
D) overemployment

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A) the C + I + G + X line will shift down but the aggregate demand curve will not shift.
B) the C + I + G + X line will shift down and the aggregate demand curve will shift to the left.
C) the C + I + G + X line will shift up and the aggregate demand curve will shift to the right.
D) the C + I + G + X line will shift up but the aggregate demand curve will not shift.

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A) consumption will increase,and so total expenditures will increase by more than $10 million.
B) consumption will decrease,and so total expenditures will increase by less than the $10 million.
C) consumption will remain the same,and so total expenditures will increase by exactly $10 million.
D) consumption will increase or decrease,and so total expenditures will increase or decrease depending on the change in consumption.

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A) decrease government spending in order to increase aggregate supply.
B) increase government spending in order to increase aggregate demand.
C) reduce taxes in order to stimulate investment,and thus increase aggregate supply.
D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply.

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A) agreeing on the appropriate fiscal policy is time consuming.
B) fiscal policy impacts the economy too fast.
C) fiscal policy impacts only urban areas of the nation.
D) fiscal policy impacts only the largest states in the nation.

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