Question 1

Many economists believe that if fiscal policy turns contractionary to reduce the deficit,

Accepted Answer

A)  monetary policy can turn expansionary to counteract the effects on aggregate demand. 
B)  monetary policy must be contractionary to reinforce the good effects of contractionary fiscal policy. 
C)  foreign investment in the United States must be encouraged. 
D)  taxes on the earnings from stock market gains should be increased. 
A)  monetary policy can turn expansionary to counteract the effects on aggregate demand. 
B)  monetary policy must be contractionary to reinforce the good effects of contractionary fiscal policy. 
C)  foreign investment in the United States must be encouraged. 
D)  taxes on the earnings from stock market gains should be increased.

Question 2

E.Carey Brown,an MIT economist,studied government deficits during the Great Depression and found that even though actual deficits were large,the structural deficit changed very little.Which of the following statements is consistent with this finding?

Accepted Answer

A)  Fiscal policy did not work during the Depression. 
B)  Fiscal policy made the Depression worse. 
C)  Fiscal policy was not tried during the Depression. 
D)  Fiscal policy improved the economy during the Depression. 
A)  Fiscal policy did not work during the Depression. 
B)  Fiscal policy made the Depression worse. 
C)  Fiscal policy was not tried during the Depression. 
D)  Fiscal policy improved the economy during the Depression.

Question 3

The principal difference between conventional accounting and economic analysis of inflation is that

Accepted Answer

A)  accountants adjust nominal values for inflation. 
B)  accountants adjust real values for inflation. 
C)  economists adjust nominal values for inflation. 
D)  economists adjust real values for inflation. 
A)  accountants adjust nominal values for inflation. 
B)  accountants adjust real values for inflation. 
C)  economists adjust nominal values for inflation. 
D)  economists adjust real values for inflation.

Question 4

The share of the net national debt owned by foreign individuals,businesses,and governments increased to 80% in 2010.

Accepted Answer

A) True 
 B)False

Question 5

Appropriate fiscal policy depends on the other major tool of governmental stabilization policy:

Accepted Answer

A)  trade policy. 
B)  tax policy. 
C)  monetary policy. 
D)  labor market policy. 
A)  trade policy. 
B)  tax policy. 
C)  monetary policy. 
D)  labor market policy.

Question 6

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

Accepted Answer

A) True 
 B)False

Question 7

A budget deficit will be most inflationary if the aggregate

Accepted Answer

A)  demand curve is very steep. 
B)  demand curve is very flat. 
C)  supply curve is very flat. 
D)  supply curve is very steep. 
A)  demand curve is very steep. 
B)  demand curve is very flat. 
C)  supply curve is very flat. 
D)  supply curve is very steep.

Question 8

In 2009,the U.S.had a budget deficit of approximately

Accepted Answer

A)  $161 billion. 
B)  $459 billion. 
C)  $800 billion. 
D)  $1.4 trillion. 
A)  $161 billion. 
B)  $459 billion. 
C)  $800 billion. 
D)  $1.4 trillion.

Question 9

Which of the following statements is incorrect?

Accepted Answer

A)  Budget deficits raise the national debt. 
B)  The concepts of deficit and debt are closely related. 
C)  Getting rid of the deficit eliminates accumulated debt. 
D)  Budget surpluses lower the national debt. 
A)  Budget deficits raise the national debt. 
B)  The concepts of deficit and debt are closely related. 
C)  Getting rid of the deficit eliminates accumulated debt. 
D)  Budget surpluses lower the national debt.

Question 10

Economic principles suggest that we should focus on balancing the budget rather than balancing aggregate supply and aggregate demand.

Accepted Answer

A) True 
 B)False

Question 11

"Budget deficits are inflationary." The truth of this statement depends on

Accepted Answer

A)  aggregate demand in the economy. 
B)  the shape of the aggregate supply curve. 
C)  the size of the national debt. 
D)  existing debt as a percentage of GDP. 
A)  aggregate demand in the economy. 
B)  the shape of the aggregate supply curve. 
C)  the size of the national debt. 
D)  existing debt as a percentage of GDP.

Question 12

What does it mean to "monetize the deficit"? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.

Accepted Answer

If the Fed wishes to keep interest rates

Question 13

The structural deficit is determined by established expenditure-transfer policies and tax rates and is independent of the current level of GDP.

Accepted Answer

A) True 
 B)False

Question 14

How sensitive is the structural deficit to the state of the economy?

Accepted Answer

A)  It is insensitive to the state of the economy. 
B)  The structural deficit changes cyclically with the economy. 
C)  Changes in the structural deficit trigger opposite swings in the economy. 
D)  The structural deficit changes countercyclically with the economy. 
A)  It is insensitive to the state of the economy. 
B)  The structural deficit changes cyclically with the economy. 
C)  Changes in the structural deficit trigger opposite swings in the economy. 
D)  The structural deficit changes countercyclically with the economy.

Question 15

The structural deficit is equal to expenditures

Accepted Answer

A)  plus transfers less taxes for the fiscal year in government statistics. 
B)  less taxes at some hypothetical high employment level. 
C)  plus transfers less taxes at some hypothetical high employment level. 
D)  less transfers for the fiscal year in government statistics. 
A)  plus transfers less taxes for the fiscal year in government statistics. 
B)  less taxes at some hypothetical high employment level. 
C)  plus transfers less taxes at some hypothetical high employment level. 
D)  less transfers for the fiscal year in government statistics.

Question 16

In 2009,the Social Security System ran a surplus of approximately $137 billion.

Accepted Answer

A) True 
 B)False

Question 17

The national debt is the

Accepted Answer

A)  result of previous budget deficits. 
B)  result of rising interest rates. 
C)  result of previous budget surpluses. 
D)  result of efficient balancing. 
A)  result of previous budget deficits. 
B)  result of rising interest rates. 
C)  result of previous budget surpluses. 
D)  result of efficient balancing.

Question 18

Figure 16-3
  
-If budget deficits shift the money demand curve as is illustrated in Figure 16-3,which component of total expenditures will be affected the most?

Accepted Answer

A)  consumption spending 
B)  government spending 
C)  private investment spending 
D)  net exports 
A)  consumption spending 
B)  government spending 
C)  private investment spending 
D)  net exports

Question 19

When the economy has substantial additional saving,deficit spending will have a large "crowding out" effect.

Accepted Answer

A) True 
 B)False

Question 20

The structural deficit or surplus

Accepted Answer

A)  shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B)  reveals the complicated structure underlying government spending and tax policy. 
C)  is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D)  includes all government budgets-federal, state, and local. 
A)  shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B)  reveals the complicated structure underlying government spending and tax policy. 
C)  is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D)  includes all government budgets-federal, state, and local.

Many economists believe that if fiscal policy turns contractionary to reduce the deficit,

E.Carey Brown,an MIT economist,studied government deficits during the Great Depression and found that even though actual deficits were large,the structural deficit changed very little.Which of the following statements is consistent with this finding?

The principal difference between conventional accounting and economic analysis of inflation is that

The share of the net national debt owned by foreign individuals,businesses,and governments increased to 80% in 2010.

Appropriate fiscal policy depends on the other major tool of governmental stabilization policy:

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

A budget deficit will be most inflationary if the aggregate

In 2009,the U.S.had a budget deficit of approximately

Which of the following statements is incorrect?

Economic principles suggest that we should focus on balancing the budget rather than balancing aggregate supply and aggregate demand.

"Budget deficits are inflationary." The truth of this statement depends on

What does it mean to "monetize the deficit"? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.

The structural deficit is determined by established expenditure-transfer policies and tax rates and is independent of the current level of GDP.

How sensitive is the structural deficit to the state of the economy?

The structural deficit is equal to expenditures

In 2009,the Social Security System ran a surplus of approximately $137 billion.

The national debt is the

Figure 16-3 -If budget deficits shift the money demand curve as is illustrated in Figure 16-3,which component of total expenditures will be affected the most?

When the economy has substantial additional saving,deficit spending will have a large "crowding out" effect.

The structural deficit or surplus

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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Exam 16: Budget Deficits in the Short and Long Run

Many economists believe that if fiscal policy turns contractionary to reduce the deficit,

E.Carey Brown,an MIT economist,studied government deficits during the Great Depression and found that even though actual deficits were large,the structural deficit changed very little.Which of the following statements is consistent with this finding?

The principal difference between conventional accounting and economic analysis of inflation is that

The share of the net national debt owned by foreign individuals,businesses,and governments increased to 80% in 2010.

Appropriate fiscal policy depends on the other major tool of governmental stabilization policy:

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

A budget deficit will be most inflationary if the aggregate

In 2009,the U.S.had a budget deficit of approximately

Which of the following statements is incorrect?

Economic principles suggest that we should focus on balancing the budget rather than balancing aggregate supply and aggregate demand.

"Budget deficits are inflationary." The truth of this statement depends on

What does it mean to "monetize the deficit"? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.

The structural deficit is determined by established expenditure-transfer policies and tax rates and is independent of the current level of GDP.

How sensitive is the structural deficit to the state of the economy?

The structural deficit is equal to expenditures

In 2009,the Social Security System ran a surplus of approximately $137 billion.

The national debt is the

Figure 16-3 -If budget deficits shift the money demand curve as is illustrated in Figure 16-3,which component of total expenditures will be affected the most?

When the economy has substantial additional saving,deficit spending will have a large "crowding out" effect.

The structural deficit or surplus

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters