Question 1

If you wanted to measure changes in fiscal policy intentions,you should use the

Accepted Answer

A)  capital budget. 
B)  actual deficit. 
C)  inflation-accounted deficit. 
D)  structural deficit. 
A)  capital budget. 
B)  actual deficit. 
C)  inflation-accounted deficit. 
D)  structural deficit.

Question 2

Higher interest rates and,therefore,a decrease in investment spending is most likely to be caused by which policy mix?

Accepted Answer

A)  deficit reduction and expansionary monetary policy 
B)  larger deficits and contractionary monetary policy 
C)  larger deficits and expansionary monetary policy 
D)  deficit reduction and contractionary monetary policy 
A)  deficit reduction and expansionary monetary policy 
B)  larger deficits and contractionary monetary policy 
C)  larger deficits and expansionary monetary policy 
D)  deficit reduction and contractionary monetary policy

Question 3

The budget deficit is the amount by which a government's expenditures exceed its receipts.

Accepted Answer

A) True 
 B)False

Question 4

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

Accepted Answer

A)  a budget surplus and expansionary monetary policy 
B)  a budget deficit and expansionary monetary policy 
C)  a budget deficit and contractionary monetary policy 
D)  a budget surplus and contractionary monetary policy 
A)  a budget surplus and expansionary monetary policy 
B)  a budget deficit and expansionary monetary policy 
C)  a budget deficit and contractionary monetary policy 
D)  a budget surplus and contractionary monetary policy

Question 5

If the economy suffers a recession for reasons unrelated to fiscal policy,the deficit should rise and

Accepted Answer

A)  inflation should fall. 
B)  interest rates should fall. 
C)  real GDP should fall. 
D)  All of the above are correct. 
A)  inflation should fall. 
B)  interest rates should fall. 
C)  real GDP should fall. 
D)  All of the above are correct.

Question 6

In the early 1990s,economists became alarmed over the national debt because it

Accepted Answer

A)  was larger than three months' GDP. 
B)  was growing faster than GDP. 
C)  had reached twice the size of GDP. 
D)  was growing faster than private debt. 
A)  was larger than three months' GDP. 
B)  was growing faster than GDP. 
C)  had reached twice the size of GDP. 
D)  was growing faster than private debt.

Question 7

The national debt is defined as the total

Accepted Answer

A)  amount that U.S. citizens owe to foreigners. 
B)  value that U.S. citizens borrow from foreigners during any time period. 
C)  value of government's indebtedness at any moment in time. 
D)  amount by which government's expenditures exceed receipts during any time period. 
A)  amount that U.S. citizens owe to foreigners. 
B)  value that U.S. citizens borrow from foreigners during any time period. 
C)  value of government's indebtedness at any moment in time. 
D)  amount by which government's expenditures exceed receipts during any time period.

Question 8

The blame for failing to address the budget deficits of the 1980s and early 1990s

Accepted Answer

A)  is clearly the fault of the Republican administrations. 
B)  is clearly the fault of the Democratic Congresses. 
C)  is a political question rather than an economic question. 
D)  is an economic question rather than a political question. 
A)  is clearly the fault of the Republican administrations. 
B)  is clearly the fault of the Democratic Congresses. 
C)  is a political question rather than an economic question. 
D)  is an economic question rather than a political question.

Question 9

To maintain a balanced budget during the sag in personal spending in 2008 could cause a

Accepted Answer

A)  further increase in aggregate demand and inflation. 
B)  further increase in aggregate demand and unemployment. 
C)  further decrease in aggregate demand and a recession. 
D)  further decrease in aggregate demand and inflation. 
A)  further increase in aggregate demand and inflation. 
B)  further increase in aggregate demand and unemployment. 
C)  further decrease in aggregate demand and a recession. 
D)  further decrease in aggregate demand and inflation.

Question 10

Proper inflation accounting is necessary to measure the size of the real deficit because

Accepted Answer

A)  as a lender, the government gains from inflation. 
B)  otherwise, the deficit is understated in inflationary times. 
C)  the government is a borrower that pays back dollars of less real value in inflationary times. 
D)  interest payments tend to fall in inflationary times. 
A)  as a lender, the government gains from inflation. 
B)  otherwise, the deficit is understated in inflationary times. 
C)  the government is a borrower that pays back dollars of less real value in inflationary times. 
D)  interest payments tend to fall in inflationary times.

Question 11

The crowding-in effect results from

Accepted Answer

A)  a low MPS. 
B)  induced investment. 
C)  induced consumption. 
D)  rising interest rates. 
A)  a low MPS. 
B)  induced investment. 
C)  induced consumption. 
D)  rising interest rates.

Question 12

The U.S.national debt at the end of fiscal year 2010 was almost

Accepted Answer

A)  $13.5 trillion. 
B)  $9.0 trillion. 
C)  $3.5 trillion. 
D)  $1.3 trillion. 
A)  $13.5 trillion. 
B)  $9.0 trillion. 
C)  $3.5 trillion. 
D)  $1.3 trillion.

Question 13

One of the principal reasons the Greek debt crisis of 2010 was so serious was because the Greek debt was

Accepted Answer

A)  an obligation to pay over a shorter period of time. 
B)  owed entirely to U.S. citizens and banks. 
C)  an obligation to pay in domestic currency. 
D)  not an obligation to pay in domestic currency. 
A)  an obligation to pay over a shorter period of time. 
B)  owed entirely to U.S. citizens and banks. 
C)  an obligation to pay in domestic currency. 
D)  not an obligation to pay in domestic currency.

Question 14

If the aggregate supply curve has its normal shape,deficit spending will increase

Accepted Answer

A)  both GDP and the price level at about the same rate. 
B)  the price level before it increases real GDP. 
C)  the price level but decrease real GDP. 
D)  real GDP before it increases the price level. 
A)  both GDP and the price level at about the same rate. 
B)  the price level before it increases real GDP. 
C)  the price level but decrease real GDP. 
D)  real GDP before it increases the price level.

Question 15

The fallacy in the strict crowding-out argument comes from supposing that

Accepted Answer

A)  the Federal Reserve always accommodates the U.S. Treasury in its financing of the deficit. 
B)  corporations always outbid small businesses for government contracts. 
C)  the economy's flow of saving is fixed. 
D)  investors will spend more when G increases. 
A)  the Federal Reserve always accommodates the U.S. Treasury in its financing of the deficit. 
B)  corporations always outbid small businesses for government contracts. 
C)  the economy's flow of saving is fixed. 
D)  investors will spend more when G increases.

Question 16

The structural deficit can be defined as

Accepted Answer

A)  the deficit that is structurally obstructing economic recovery to reach level of high employment. 
B)  a hypothetical construct that estimates the deficit, given current tax rates and expenditure policies, if the economy were operating at some fixed high-employment level. 
C)  the deficit necessary to restructure the economy and reach a desired high-employment level. 
D)  the deficit that would prevail if fiscal policy were structured differently in order to reach a desired high-employment level. 
A)  the deficit that is structurally obstructing economic recovery to reach level of high employment. 
B)  a hypothetical construct that estimates the deficit, given current tax rates and expenditure policies, if the economy were operating at some fixed high-employment level. 
C)  the deficit necessary to restructure the economy and reach a desired high-employment level. 
D)  the deficit that would prevail if fiscal policy were structured differently in order to reach a desired high-employment level.

Question 17

The Troubled Asset Relief Program (TARP)totaled ____ and the fiscal stimulus package of 2009 totaled ____.

Accepted Answer

A)  $1.4 trillion; $800 billion 
B)  $1.4 trillion; $700 billion 
C)  $700 billion; $800 billion 
D)  $700 billion; $1.4 trillion 
A)  $1.4 trillion; $800 billion 
B)  $1.4 trillion; $700 billion 
C)  $700 billion; $800 billion 
D)  $700 billion; $1.4 trillion

Question 18

If the Federal Reserve takes no countervailing actions,an expansionary fiscal policy will increase the deficit,increase GDP,increase prices,and drive up interest rates.

Accepted Answer

A) True 
 B)False

Question 19

If the U.S.government decides to eliminate a budget surplus by reducing taxes,the most likely effect would be

Accepted Answer

A)  falling prices. 
B)  a reduction in the trade deficit. 
C)  an increase in unemployment. 
D)  upward pressure on prices. 
A)  falling prices. 
B)  a reduction in the trade deficit. 
C)  an increase in unemployment. 
D)  upward pressure on prices.

Question 20

In actual practice,does the Fed monetize the debt?

Accepted Answer

A)  No, it did not do so even with large deficits in the 1980s and early 2000s. 
B)  No longer, although it monetized much of the deficit in the 1980s. 
C)  Yes, although it monetizes less now than in the 1980s. 
D)  Yes, it has monetized the deficit steadily since the early 1970s. 
A)  No, it did not do so even with large deficits in the 1980s and early 2000s. 
B)  No longer, although it monetized much of the deficit in the 1980s. 
C)  Yes, although it monetizes less now than in the 1980s. 
D)  Yes, it has monetized the deficit steadily since the early 1970s.

If you wanted to measure changes in fiscal policy intentions,you should use the

Higher interest rates and,therefore,a decrease in investment spending is most likely to be caused by which policy mix?

The budget deficit is the amount by which a government's expenditures exceed its receipts.

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

If the economy suffers a recession for reasons unrelated to fiscal policy,the deficit should rise and

In the early 1990s,economists became alarmed over the national debt because it

The national debt is defined as the total

The blame for failing to address the budget deficits of the 1980s and early 1990s

To maintain a balanced budget during the sag in personal spending in 2008 could cause a

Proper inflation accounting is necessary to measure the size of the real deficit because

The crowding-in effect results from

The U.S.national debt at the end of fiscal year 2010 was almost

One of the principal reasons the Greek debt crisis of 2010 was so serious was because the Greek debt was

If the aggregate supply curve has its normal shape,deficit spending will increase

The fallacy in the strict crowding-out argument comes from supposing that

The structural deficit can be defined as

The Troubled Asset Relief Program (TARP)totaled and the fiscal stimulus package of 2009 totaled .

If the Federal Reserve takes no countervailing actions,an expansionary fiscal policy will increase the deficit,increase GDP,increase prices,and drive up interest rates.

If the U.S.government decides to eliminate a budget surplus by reducing taxes,the most likely effect would be

In actual practice,does the Fed monetize the debt?

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

Exam 16: Budget Deficits in the Short and Long Run

If you wanted to measure changes in fiscal policy intentions,you should use the

Higher interest rates and,therefore,a decrease in investment spending is most likely to be caused by which policy mix?

The budget deficit is the amount by which a government's expenditures exceed its receipts.

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

If the economy suffers a recession for reasons unrelated to fiscal policy,the deficit should rise and

In the early 1990s,economists became alarmed over the national debt because it

The national debt is defined as the total

The blame for failing to address the budget deficits of the 1980s and early 1990s

To maintain a balanced budget during the sag in personal spending in 2008 could cause a

Proper inflation accounting is necessary to measure the size of the real deficit because

The crowding-in effect results from

The U.S.national debt at the end of fiscal year 2010 was almost

One of the principal reasons the Greek debt crisis of 2010 was so serious was because the Greek debt was

If the aggregate supply curve has its normal shape,deficit spending will increase

The fallacy in the strict crowding-out argument comes from supposing that

The structural deficit can be defined as

The Troubled Asset Relief Program (TARP)totaled ____ and the fiscal stimulus package of 2009 totaled ____.

If the Federal Reserve takes no countervailing actions,an expansionary fiscal policy will increase the deficit,increase GDP,increase prices,and drive up interest rates.

If the U.S.government decides to eliminate a budget surplus by reducing taxes,the most likely effect would be

In actual practice,does the Fed monetize the debt?

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

The Troubled Asset Relief Program (TARP)totaled and the fiscal stimulus package of 2009 totaled .