Question 1

If the government borrows money from the Federal Reserve:

Accepted Answer

A)   the quantity of publicly held bonds will rise.
B)   the quantity of money in circulation will rise.
C)   the quantity of money in circulation will fall.
D)   inflation will decrease.

Question 2

Of the share of the U.S. national debt that is held by the public, _____ hold nearly ____.

Accepted Answer

A)   foreigners; three times as much as do Americans
B)   foreigners; twice as much as do Americans
C)   Americans; twice as much as do foreigners
D)   foreigners; the same amount as do Americans

Question 3

The largest category of federal government spending in 2015 was:

Accepted Answer

A)   defense.
B)   Social Security.
C)   education.
D)   net interest.

Question 4

Public choice economists think deficit spending reduces the perceived cost of current government operations and then shifts additional costs to the next generation.

Accepted Answer

A) True 
 B)False

Question 5

The budget philosophy closest in spirit to Keynesian economics is:

Accepted Answer

A)   the cyclically balanced budget.
B)   perpetual deficit spending.
C)   the annually balanced budget.
D)   functional finance.

Question 6

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.

Question 7

The corporate income tax constitutes _____ of federal government revenues.

Accepted Answer

A)   up to 25%
B)   25% to 50%
C)   50% to 75%
D)   zero (there is no corporate income tax at the federal level)

Question 8

The burden of a nation's debt rises if interest rates fall.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following measures is NOT an example of discretionary fiscal policy?

Accepted Answer

A)   The unemployment compensation program pays out more money as the unemployment rate rises.
B)   Tax rates are increased in the hope of slowing down the rate of inflation.
C)   Tax increases are enacted to reduce the government deficit.
D)   Government spending is increased to reduce the problems caused by a recession.

Question 10

Fiscal policy that focuses on shifting the long-run aggregate supply curve to the right is:

Accepted Answer

A)   aggregate shifts policy.
B)   contractionary policy.
C)   supply-side fiscal policy.
D)   consumption policy.

Question 11

Automatic stabilizers include all of the following EXCEPT:

Accepted Answer

A)   unemployment compensation benefits.
B)   welfare payments.
C)   national defense spending.
D)   tax revenues.

Question 12

The crowding-out effect can drive up interest rates, which _____ consumer spending on durable goods and _____ business investment.

Accepted Answer

A)   reduces; increases
B)   reduces; reduces
C)   increases; reduces
D)   increases; increases

Question 13

When workers lose their job, they file for unemployment benefits; therefore government spending on such programs naturally rises during recessions. As the economy recovers and people go back to work, spending on unemployment programs shrinks. Based on the given information, which of the following is correct?

Accepted Answer

A)   Unemployment benefit programs are an example of discretionary fiscal policy.
B)   Unemployment compensation is a form of an automatic stabilizer.
C)   The spending on unemployment benefits is designed to increase short-run aggregate supply during recessions.
D)   Unemployment benefit programs are an example of a supply-side policy.

Question 14

_____ 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 15

Government spending on public investment is more likely to hurt future generations than is government spending on current consumption.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are considered expansionary fiscal policies EXCEPT:

Accepted Answer

A)   a reduction in unemployment compensation.
B)   a decrease in personal taxes.
C)   an increase in government spending.
D)   an increase in transfer payments.

Question 17

An investment tax credit for pharmaceutical research is a demand-side fiscal policy.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements do economists generally disagree on?

Accepted Answer

A)   No tax revenues would be collected when average tax rates are 0%.
B)   No tax revenues would be collected when average tax rates are 100%.
C)   At very high average tax rates, increasing tax rates further would decrease tax revenues.
D)   At an average tax rate of 50%, tax revenues are maximized for a government.

Question 19

Which of the following statements is (are)  true? I. As interest rates fall, the burden of the federal deficit is reduced.
II)  As financial markets become more global in scale, it has reduced the burden of the federal deficit.
III)  Recent increases in tax revenues due to a growing economy have reduced the federal budget deficit and the national debt.

Accepted Answer

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

Question 20

(Figure: Effects of Policy Shifts)  If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from _____ to _____, and equilibrium will move from point _____ to _____. 1; AD0; a; b B)  AD1; AD0; b; a C)  AD0; AD1; b; a D)  AD0; AD1; a; b" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   AD1; AD0; a; b
B)   AD1; AD0; b; a
C)   AD0; AD1; b; a
D)   AD0; AD1; a; b

Exam 10: Fiscal Policy and Debt

All of the following are considered expansionary fiscal policies EXCEPT:

Correct Answer
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Correct Answer
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The budget philosophy closest in spirit to Keynesian economics is:

Correct Answer
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Fiscal policy that focuses on shifting the long-run aggregate supply curve to the right is:

Correct Answer
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The largest category of federal government spending in 2015 was:

Correct Answer
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Automatic stabilizers include all of the following EXCEPT:

Correct Answer
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The crowding-out effect can drive up interest rates, which _ consumer spending on durable goods and _ business investment.

Correct Answer
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If the government borrows money from the Federal Reserve:

Correct Answer
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Government spending on public investment is more likely to hurt future generations than is government spending on current consumption.

Correct Answer
verified

Which of the following statements do economists generally disagree on?

Correct Answer
verified

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

Correct Answer
verified

The burden of a nation's debt rises if interest rates fall.

Correct Answer
verified

The corporate income tax constitutes _____ of federal government revenues.

Correct Answer
verified

During an economic expansion, automatic stabilizers:

Correct Answer
verified

An investment tax credit for pharmaceutical research is a demand-side fiscal policy.

Correct Answer
verified

Public choice economists think deficit spending reduces the perceived cost of current government operations and then shifts additional costs to the next generation.

Correct Answer
verified

Correct Answer
verified

Which of the following measures is NOT an example of discretionary fiscal policy?

Correct Answer
verified

Of the share of the U.S. national debt that is held by the public, _ hold nearly .

Correct Answer
verified

(Figure: Effects of Policy Shifts) If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from ___ to _, and equilibrium will move from point _ to ___.

Correct Answer
verified

Exam 10: Fiscal Policy and Debt

All of the following are considered expansionary fiscal policies EXCEPT:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The budget philosophy closest in spirit to Keynesian economics is:

Correct AnswerverifiedShow Answer

Fiscal policy that focuses on shifting the long-run aggregate supply curve to the right is:

Correct AnswerverifiedShow Answer

The largest category of federal government spending in 2015 was:

Correct AnswerverifiedShow Answer

Automatic stabilizers include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

The crowding-out effect can drive up interest rates, which _____ consumer spending on durable goods and _____ business investment.

Correct AnswerverifiedShow Answer

If the government borrows money from the Federal Reserve:

Correct AnswerverifiedShow Answer

Government spending on public investment is more likely to hurt future generations than is government spending on current consumption.

Correct AnswerverifiedShow Answer

Which of the following statements do economists generally disagree on?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The burden of a nation's debt rises if interest rates fall.

Correct AnswerverifiedShow Answer

The corporate income tax constitutes _____ of federal government revenues.

Correct AnswerverifiedShow Answer

During an economic expansion, automatic stabilizers:

Correct AnswerverifiedShow Answer

An investment tax credit for pharmaceutical research is a demand-side fiscal policy.

Correct AnswerverifiedShow Answer

Public choice economists think deficit spending reduces the perceived cost of current government operations and then shifts additional costs to the next generation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following measures is NOT an example of discretionary fiscal policy?

Correct AnswerverifiedShow Answer

Of the share of the U.S. national debt that is held by the public, _____ hold nearly ____.

Correct AnswerverifiedShow Answer

(Figure: Effects of Policy Shifts) If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from _____ to _____, and equilibrium will move from point _____ to _____.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The crowding-out effect can drive up interest rates, which _ consumer spending on durable goods and _ business investment.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Of the share of the U.S. national debt that is held by the public, _ hold nearly .

Correct Answer
verified

(Figure: Effects of Policy Shifts) If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from ___ to _, and equilibrium will move from point _ to ___.

Correct Answer
verified