Question 1

To close a recessionary gap using fiscal policy,the government can:​

Accepted Answer

A) increase government spending by the size of the gap. 
B) decrease government spending by the size of the gap. 
C) increase government spending by more than the size of the gap. 
D) increase government spending by less than the size of the gap. 
E) decrease government spending by more than the size of the gap. 
A) increase government spending by the size of the gap. 
B) decrease government spending by the size of the gap. 
C) increase government spending by more than the size of the gap. 
D) increase government spending by less than the size of the gap. 
E) decrease government spending by more than the size of the gap. D

Question 2

​The one-time tax cuts used by the Bush administration to stimulate the economy in 2008 proved to be very successful.

Accepted Answer

A) True 
 B)False  False

Question 3

The unemployment problem becomes more severe if prices are sticky downward.​

Accepted Answer

A) True 
 B)False  True

Question 4

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.​

Accepted Answer

A) True 
 B)False

Question 5

Which of the following was a successful application of fiscal policy in the United States?​

Accepted Answer

A) Roosevelt's strategy in combating the Great Depression 
B) The tax cut of 1964 
C) The temporary tax surcharge of 1968 
D) The battle against stagflation during the 1970s 
E) The large tax cut of 1981 
A) Roosevelt's strategy in combating the Great Depression 
B) The tax cut of 1964 
C) The temporary tax surcharge of 1968 
D) The battle against stagflation during the 1970s 
E) The large tax cut of 1981

Question 6

A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.​

Accepted Answer

A) True 
 B)False

Question 7

​The effectiveness of any stimulus program depends on:

Accepted Answer

A) the nature of the tax only 
B) the size of the tax and spending multipliers 
C) the nature of the tax and tax multipliers 
D) the income group targeted 
E) the marginal propensity to consume only 
A) the nature of the tax only 
B) the size of the tax and spending multipliers 
C) the nature of the tax and tax multipliers 
D) the income group targeted 
E) the marginal propensity to consume only

Question 8

Which of the following is not a tool of fiscal policy?​

Accepted Answer

A) Money supply 
B) Government purchases 
C) Taxes 
D) Social Security program​ 
E) Unemployment benefits 
A) Money supply 
B) Government purchases 
C) Taxes 
D) Social Security program​ 
E) Unemployment benefits

Question 9

_____ is contrary to a laissez-faire economic system.​

Accepted Answer

A) Active government intervention in all economic decisions 
B) Reliance on prices to adjust to changing market conditions 
C) The theory put forward by classical economics 
D) The theory introduced by neoclassical economics 
E) The market acting as an invisible hand 
A) Active government intervention in all economic decisions 
B) Reliance on prices to adjust to changing market conditions 
C) The theory put forward by classical economics 
D) The theory introduced by neoclassical economics 
E) The market acting as an invisible hand

Question 10

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.​

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?​

Accepted Answer

A) It is ineffective in dealing with stagflation. 
B) Its correct implementation depends on an accurate estimate of potential output. 
C) It is subject to lags. 
D) It affects only aggregate demand but does not have any impact on aggregate supply. 
E) Households may not respond to changes they perceive as permanent. 
A) It is ineffective in dealing with stagflation. 
B) Its correct implementation depends on an accurate estimate of potential output. 
C) It is subject to lags. 
D) It affects only aggregate demand but does not have any impact on aggregate supply. 
E) Households may not respond to changes they perceive as permanent.

Question 12

One lesson of the Great Depression was that potential GDP could _____.​

Accepted Answer

A) be too low to ensure full employment if the population was growing 
B) be too low to ensure full employment in a capitalist economy 
C) be too low to ensure full employment in a market economy 
D) fall short of full-employment GDP 
E) exceed equilibrium GDP 
A) be too low to ensure full employment if the population was growing 
B) be too low to ensure full employment in a capitalist economy 
C) be too low to ensure full employment in a market economy 
D) fall short of full-employment GDP 
E) exceed equilibrium GDP

Question 13

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.​

Accepted Answer

A) True 
 B)False

Question 14

During a recession,unemployment insurance ensures that:​

Accepted Answer

A) the disposable income of those who are unemployed will increase above the usual level. 
B) disposable income does not fall by as much as GDP decreases. 
C) disposable income increases as GDP falls. 
D) the marginal propensity to consume increases. 
E) the marginal propensity to consume decreases. 
A) the disposable income of those who are unemployed will increase above the usual level. 
B) disposable income does not fall by as much as GDP decreases. 
C) disposable income increases as GDP falls. 
D) the marginal propensity to consume increases. 
E) the marginal propensity to consume decreases.

Question 15

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____. ​
Figure 11.1

Accepted Answer

A) increase taxes 
B) decrease transfer payments 
C) decrease government purchases 
D) wait for the SRAS curve to shift to the left 
E) increase its purchases 
A) increase taxes 
B) decrease transfer payments 
C) decrease government purchases 
D) wait for the SRAS curve to shift to the left 
E) increase its purchases

Question 16

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.​

Accepted Answer

A) True 
 B)False

Question 17

A $100 billion increase in government purchases will have the same effect on real GDP as a $100billion decrease in net taxes.​

Accepted Answer

A) True 
 B)False

Question 18

The steeper the short-run aggregate supply curve,_____.​

Accepted Answer

A) the steeper the aggregate demand curve 
B) the larger the value of the spending multiplier 
C) the larger the budget surplus 
D) the larger the impact of a shift in aggregate demand on the equilibrium price level 
E) the larger the impact of a shift in aggregate demand on the equilibrium output level 
A) the steeper the aggregate demand curve 
B) the larger the value of the spending multiplier 
C) the larger the budget surplus 
D) the larger the impact of a shift in aggregate demand on the equilibrium price level 
E) the larger the impact of a shift in aggregate demand on the equilibrium output level

Question 19

Which of the following is an example of an automatic stabilizer?​

Accepted Answer

A) Decrease in tax rates by Congress in times of unemployment 
B) Decrease in tax rates by Congress in times of inflation 
C) Increase in government defense spending during war 
D) Increase in unemployment compensation during recession 
E) Decrease in welfare programs during inflation 
A) Decrease in tax rates by Congress in times of unemployment 
B) Decrease in tax rates by Congress in times of inflation 
C) Increase in government defense spending during war 
D) Increase in unemployment compensation during recession 
E) Decrease in welfare programs during inflation

Question 20

​Fiscal policy is concerned with _____.

Accepted Answer

A) government spending and taxation 
B) government spending and changes in money supply 
C) money supply and taxation 
D) government spending,taxation,and money supply 
E) only money supply 
A) government spending and taxation 
B) government spending and changes in money supply 
C) money supply and taxation 
D) government spending,taxation,and money supply 
E) only money supply

To close a recessionary gap using fiscal policy,the government can:

The one-time tax cuts used by the Bush administration to stimulate the economy in 2008 proved to be very successful.

The unemployment problem becomes more severe if prices are sticky downward.

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.

Which of the following was a successful application of fiscal policy in the United States?

A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.

The effectiveness of any stimulus program depends on:

Which of the following is not a tool of fiscal policy?

_____ is contrary to a laissez-faire economic system.

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.

Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?

One lesson of the Great Depression was that potential GDP could _____.

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.

During a recession,unemployment insurance ensures that:

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____. Figure 11.1

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.

A $100 billion increase in government purchases will have the same effect on real GDP as a $100billion decrease in net taxes.

The steeper the short-run aggregate supply curve,_____.

Which of the following is an example of an automatic stabilizer?

Fiscal policy is concerned with _____.

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 11: Fiscal Policy

To close a recessionary gap using fiscal policy,the government can:​

​The one-time tax cuts used by the Bush administration to stimulate the economy in 2008 proved to be very successful.

The unemployment problem becomes more severe if prices are sticky downward.​

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.​

Which of the following was a successful application of fiscal policy in the United States?​

A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.​

​The effectiveness of any stimulus program depends on:

Which of the following is not a tool of fiscal policy?​

_____ is contrary to a laissez-faire economic system.​

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.​

Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?​

One lesson of the Great Depression was that potential GDP could _____.​

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.​

During a recession,unemployment insurance ensures that:​

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____. ​ Figure 11.1

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.​

A $100 billion increase in government purchases will have the same effect on real GDP as a $100billion decrease in net taxes.​

The steeper the short-run aggregate supply curve,_____.​

Which of the following is an example of an automatic stabilizer?​

​Fiscal policy is concerned with _____.

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aggregate Demand

Aggregate Supply

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

To close a recessionary gap using fiscal policy,the government can:

The one-time tax cuts used by the Bush administration to stimulate the economy in 2008 proved to be very successful.

The unemployment problem becomes more severe if prices are sticky downward.

Discretionary fiscal policy works by shifting the short-run aggregate supply curve.

Which of the following was a successful application of fiscal policy in the United States?

A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.

The effectiveness of any stimulus program depends on:

Which of the following is not a tool of fiscal policy?

_____ is contrary to a laissez-faire economic system.

One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.

Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?

One lesson of the Great Depression was that potential GDP could _____.

The natural rate of unemployment is that rate at which the economy achieves its potential real GDP.

During a recession,unemployment insurance ensures that:

Figure 11.1 shows the relationship between the price level and the real GDP.If the government wants the economy to be at full employment,it should _____. Figure 11.1

There is substantial evidence that people base their consumption decisions more on their current income than on the average income they expect to receive over a long period of time.

A $100 billion increase in government purchases will have the same effect on real GDP as a $100billion decrease in net taxes.

The steeper the short-run aggregate supply curve,_____.

Which of the following is an example of an automatic stabilizer?

Fiscal policy is concerned with _____.