Question 1

Margot is complaining about how much she pays in taxes now that the economy is finally doing well. Even though she's in the same tax bracket as she was last year, she got a raise and is paying $500 more in taxes this year. Margot's increased tax payment to the government is an example of:

Accepted Answer

A)   expansionary fiscal policy.
B)   contractionary fiscal policy.
C)   discretionary fiscal policy.
D)   an automatic stabilizer.E) None of the above
F) A) and D)

Question 2

Treasury bonds:

Accepted Answer

A)   make a set-rate interest payment every six months.
B)   are protected against inflation.
C)   promise a set amount of money to be paid on a fixed date.
D)   mature in 30 years.E) All of the above
F) B) and C)

Question 3

When congressional policymakers wish to reduce aggregate demand, they might enact:

Accepted Answer

A)   contractionary fiscal policy.
B)   expansionary fiscal policy.
C)   contractionary monetary policy.
D)   expansionary monetary policy.E) All of the above
F) B) and C)

Question 4

If the government were to decrease spending, aggregate demand would _______ and GDP would _______.

Accepted Answer

A)   fall; fall as well.
B)   rise; fall.
C)   fall; rise.
D)   rise; rise as well.E) None of the above
F) A) and B)

Question 5

Transfer payments:

Accepted Answer

A)   are payments from government accounts to individuals for programs that do not involve a purchase of goods or services.
B)   transfer goods and services to eligible participants.
C)   are included in GDP calculation.
D)   All of these are true.E) All of the above
F) C) and D)

Question 6

Expansionary fiscal policy refers to decisions about taxation and spending that:

Accepted Answer

A)   increase aggregate demand.
B)   decrease aggregate demand.
C)   increase aggregate supply.
D)   decrease aggregate supply.E) All of the above
F) None of the above

Question 7

Treasury notes:

Accepted Answer

A)   make a set-rate interest payment every six months.
B)   are protected against inflation.
C)   promise a set amount of money to be paid on a fixed date.
D)   mature in 30 years.E) A) and B)
F) A) and C)

Question 8

The government would most likely enact contractionary fiscal policy during _______.

Accepted Answer

A)   an asset price bubble
B)   economic recession
C)   a long period of stagflation
D)   None of these are an advantageous time to conduct contractionary fiscal policy.E) None of the above
F) B) and D)

Question 9

Economists generally express the U.S. budget deficit as:

Accepted Answer

A)   the total amount the government overspent.
B)   a percentage of total GDP.
C)   a percentage of the amount of taxes collected.
D)   a partitioned amount based on where the government spent the money.E) B) and C)
F) A) and C)

Question 10

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

Accepted Answer

A)   holds, and people increase their spending.
B)   holds, and people save more.
C)   fails to hold, and people increase their spending.
D)   fails to hold, and people save more.E) All of the above
F) B) and C)

Question 11

If the government introduces a new bill increasing education spending, it is enacting:

Accepted Answer

A)   expansionary fiscal policy.
B)   contractionary fiscal policy.
C)   expansionary monetary policy.
D)   contractionary monetary policy.E) A) and D)
F) None of the above

Question 12

The process of deciding on and passing fiscal policy legislation creates a(n)  _______ lag.

Accepted Answer

A)   information
B)   formulation
C)   implementation
D)   directionE) All of the above
F) B) and D)

Question 13

Lags in the policy-making process come from:

Accepted Answer

A)   a lack of understanding regarding the current state of the economy.
B)   the process of deciding on and passing legislation.
C)   the time it takes for policy to impact the economy.
D)   All of these are true.E) B) and C)
F) C) and D)

Question 14

The graph shown displays various economic outcomes.  If fiscal policy moves the economy from equilibrium A to equilibrium B:

Accepted Answer

A)   the economy has not been restored to its full potential output.
B)   the economy has been restored to its full potential output.
C)   the economy has overheated and equilibrium has pushed output beyond its potential.
D)   unemployment has increased.E) A) and C)
F) B) and D)

Question 15

Income taxes are an example of:

Accepted Answer

A)   an automatic stabilizer.
B)   discretionary fiscal policy.
C)   expansionary fiscal policy.
D)   contractionary fiscal policy.E) A) and D)
F) A) and C)

Question 16

The table shown displays information about a country's public debt.  Between which years did debt as a percentage of GDP decrease?

Accepted Answer

A)   2000 to 2010
B)   2010 to 2020
C)   2020 to 2030
D)   2000 to 2020E) B) and C)
F) A) and B)

Question 17

Treasury bills:

Accepted Answer

A)   promise a set-rate interest payment every six months.
B)   are protected against inflation.
C)   promise a set amount of money to be paid on a fixed date.
D)   mature in 30 years.E) A) and B)
F) All of the above

Question 18

The graph shown displays various economic outcomes. 3 output with lower prices. B)  SRAS will shift to the left, and the economy will experience stagflation. C)  LRAS will shift to the left until equilibrium is reached. D)  AD will shift to the right, restoring long-run equilibrium." class="answers-bank-image d-inline" rel="preload" > If the economy is currently at equilibrium B, and the government does nothing, then eventually:

Accepted Answer

A)   SRAS will shift to the right, and the economy will have Y 3 output with lower prices.
B)   SRAS will shift to the left, and the economy will experience stagflation.
C)   LRAS will shift to the left until equilibrium is reached.
D)   AD will shift to the right, restoring long-run equilibrium.E) B) and D)
F) A) and C)

Question 19

If the government enacts contractionary fiscal policy, it:

Accepted Answer

A)   must want to slow economic activity.
B)   could increase taxes.
C)   expects aggregate demand to decrease.
D)   All of these are true.E) B) and D)
F) A) and C)

Question 20

During a severe recession, the government allows citizens to pay less in taxes. This is an example of:

Accepted Answer

A)   discretionary fiscal policy.
B)   an automatic stabilizer.
C)   contractionary fiscal policy.
D)   expansionary fiscal policy.E) B) and C)
F) All of the above

Exam 13: Fiscalpolicy

The table shown displays information about a country's public debt. Between which years did debt as a percentage of GDP decrease?

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Economists generally express the U.S. budget deficit as:

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The process of deciding on and passing fiscal policy legislation creates a(n) _______ lag.

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The graph shown displays various economic outcomes. If the economy is currently at equilibrium B, and the government does nothing, then eventually:

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Treasury bonds:

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Expansionary fiscal policy refers to decisions about taxation and spending that:

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Income taxes are an example of:

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Transfer payments:

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The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

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The graph shown displays various economic outcomes. If fiscal policy moves the economy from equilibrium A to equilibrium B:

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The government would most likely enact contractionary fiscal policy during _______.

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During a severe recession, the government allows citizens to pay less in taxes. This is an example of:

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Margot is complaining about how much she pays in taxes now that the economy is finally doing well. Even though she's in the same tax bracket as she was last year, she got a raise and is paying $500 more in taxes this year. Margot's increased tax payment to the government is an example of:

Correct AnswerverifiedShow Answer

If the government enacts contractionary fiscal policy, it:

Correct AnswerverifiedShow Answer

Lags in the policy-making process come from:

Correct AnswerverifiedShow Answer

Treasury notes:

Correct AnswerverifiedShow Answer

When congressional policymakers wish to reduce aggregate demand, they might enact:

Correct AnswerverifiedShow Answer

Treasury bills:

Correct AnswerverifiedShow Answer

If the government were to decrease spending, aggregate demand would _______ and GDP would _______.

Correct AnswerverifiedShow Answer

If the government introduces a new bill increasing education spending, it is enacting:

Correct AnswerverifiedShow Answer

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If the government were to decrease spending, aggregate demand would _ and GDP would _.

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