Question 1

If the Fed lowers the federal funds rate, eventually the

Accepted Answer

A)  AD curve shifts leftward, decreasing real GDP and raising the price level.
B)  AS curve shifts leftward, decreasing real GDP and raising the price level.
C)  AD curve shifts rightward, increasing real GDP and raising the price level.
D)  AD curve shifts leftward, decreasing real GDP and lowering the price level.
E)  AS curve shifts rightward, decreasing real GDP and raising the price level.F) B) and D)
G) C) and D)

Question 2

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Accepted Answer

A)  taxes and expenditure.
B)  discretionary taxes and expenditure.
C)  government.
D)  stabilizers.
E)  discretionary policy.F) B) and E)
G) D) and E)

Question 3

When tax revenue ________ outlays is positive, then the government has a budget ________.

Accepted Answer

A)  minus; surplus
B)  divided by; surplus
C)  minus; deficit
D)  plus; deficit
E)  plus; surplusF) A) and D)
G) D) and E)

Question 4

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Accepted Answer

The federal government's budget could ha...

Question 5

The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately.

Accepted Answer

A)  increased; short-term; increase
B)  decreased; long-term; decrease
C)  increased; long-term; increase
D)  increased; short-term; decrease
E)  decreased; short-term; decreaseF) B) and E)
G) A) and B)

Question 6

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

Accepted Answer

A)  surplus of $5 million.
B)  deficit of $5 million.
C)  surplus of $105 million.
D)  deficit of $105 million.
E)  surplus of $100 million and a deficit of $105 million.F) None of the above
G) A) and B)

Question 7

Needs-tested spending is best described as

Accepted Answer

A)  spending on programs that entitle qualified persons and businesses to receive benefits.
B)  spending on programs that have been tested in some manner.
C)  spending on programs that have proven over time to be sound investments.
D)  spending on programs that are considered necessities (needed) according to surveys of the public.
E)   not spending at all but a reference to the reliability of budget.F) D) and E)
G) B) and E)

Question 8

The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.

Accepted Answer

A)  increase; increase
B)  increase; decrease
C)  decrease; increase
D)  decrease; decrease
E)  increase; do not changeF) A) and D)
G) B) and C)

Question 9

When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

Accepted Answer

A)  lowers; lowers
B)  lowers; raises
C)  raises; lowers
D)  raises; raises
E)  does not change; the Fed raisesF) C) and E)
G) A) and D)

Question 10

If government expenditure on goods and services increase by $10 billion, then aggregate demand

Accepted Answer

A)  increases by $10 billion.
B)  increases by $10 billion multiplied by the government expenditure multiplier.
C)  increases by $10 billion multiplied by the tax multiplier.
D)  decreases by $10 billion.
E)  decreases by $10 billion multiplied by the government expenditure multiplier.F) A) and B)
G) A) and C)

Question 11

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Accepted Answer

A)  The real interest rate falls.
B)  Other short-term interest rates fall.
C)  Aggregate demand increases.
D)  Real GDP increases.
E)  The price level falls.F) A) and E)
G) A) and D)

Question 12

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes?
 Explain your answer.

Accepted Answer

The multiplier for a change in governmen...

Question 13

National debt decreases in a given year when a country has

Accepted Answer

A)  a budget deficit.
B)  a balanced budget.
C)  a budget supplement.
D)  a budget surplus.
E)  no discretionary fiscal policy.F) B) and E)
G) All of the above

Question 14

Discretionary fiscal policy is a fiscal policy action, such as

Accepted Answer

A)  an interest rate cut, initiated by an act of Congress.
B)  an increase in payments to the unemployed, initiated by the state of the economy.
C)  a tax cut, initiated by an act of Congress.
D)  a decrease in tax receipts, initiated by the state of the economy.
E)  an increase in the quantity of money.F) B) and C)
G) None of the above

Question 15

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

Accepted Answer

A)  deficit is $5 billion, and government debt will remain the same.
B)  surplus is $5 billion, and government debt will increase by $5 billion.
C)  deficit is $5 billion, and government debt will increase by $5 billion.
D)  deficit is $5 billion, and government debt will decrease by $5 billion.
E)  surplus is $230 billion, and the budget deficit is $235 billion.F) B) and C)
G) B) and E)

Question 16

If the Fed sells government securities, other interest rates ________ and then exchange rate ________.

Accepted Answer

A)  rise; does not change
B)  fall; falls
C)  do not change; rises
D)  rise; falls
E)  rise; risesF) B) and D)
G) A) and B)

Question 17

When government outlays exceed tax revenue, the situation is called a budget

Accepted Answer

A)  with a negative balance.
B)  deficit.
C)  surplus.
D)  debt.
E)  with no balance.F) A) and C)
G) A) and E)

Question 18

20.3 Chapter Figures
  
The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
-In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.

Accepted Answer

A)  recessionary; exactly; exactly
B)  inflationary; less than; less than
C)  recessionary; less than; more than
D)  recessionary; less than; less than
E)  recessionary; more than; more thanF) C) and D)
G) A) and B)

Question 19

If the Fed is concerned about inflation, its actions ________ long-term interest rates so that investment ________ and net exports ________.

Accepted Answer

A)  lower; increases; increase
B)  lower; increases; decrease
C)  raise; decreases; decrease
D)  lower; decreases; decrease
E)  raise; increases; increaseF) B) and E)
G) A) and B)

Question 20

Induced taxes are defined as taxes

Accepted Answer

A)  we are forced to pay for services from the government.
B)  that vary with real GDP.
C)  that are avoided with the use of legal tax shelters.
D)  enacted by Congress that explicitly state the amount to be paid.
E)  that rise in recessions and fall in expansions.F) B) and C)
G) B) and E)

Exam 20: Fiscal Policy and Monetary Policy

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

Correct Answer
verified

Induced taxes are defined as taxes

Correct Answer
verified

When government outlays exceed tax revenue, the situation is called a budget

Correct Answer
verified

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

Correct Answer
verified

Correct Answer
verified

If the Fed is concerned about inflation, its actions long-term interest rates so that investment and net exports .

Correct Answer
verified

Needs-tested spending is best described as

Correct Answer
verified

Discretionary fiscal policy is a fiscal policy action, such as

Correct Answer
verified

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Correct Answer
verified

The FOMC is concerned about inflation and has the federal funds rate. Due to substitution effects, other interest rates will almost immediately.

Correct Answer
verified

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Correct Answer
verified
The federal government's budget could ha...
View Answer

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes? Explain your answer.

Correct Answer
verified
The multiplier for a change in governmen...
View Answer

The supply-side effects of an income tax cut potential GDP and aggregate supply.

Correct Answer
verified

If the Fed lowers the federal funds rate, eventually the

Correct Answer
verified

If the Fed sells government securities, other interest rates and then exchange rate .

Correct Answer
verified

When tax revenue outlays is positive, then the government has a budget .

Correct Answer
verified

If government expenditure on goods and services increase by $10 billion, then aggregate demand

Correct Answer
verified

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Correct Answer
verified

When the Fed worries about inflation, it the federal funds rate and, in the short run, the real interest rate.

Correct Answer
verified

National debt decreases in a given year when a country has

Correct Answer
verified

Exam 20: Fiscal Policy and Monetary Policy

The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

Correct AnswerverifiedShow Answer

Induced taxes are defined as taxes

Correct AnswerverifiedShow Answer

When government outlays exceed tax revenue, the situation is called a budget

Correct AnswerverifiedShow Answer

If tax revenue is $230 billion and the government's outlays are $235 billion, then the budget

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Fed is concerned about inflation, its actions ________ long-term interest rates so that investment ________ and net exports ________.

Correct AnswerverifiedShow Answer

Needs-tested spending is best described as

Correct AnswerverifiedShow Answer

Discretionary fiscal policy is a fiscal policy action, such as

Correct AnswerverifiedShow Answer

If the Fed lowers the federal funds rate, which of the following will NOT happen?

Correct AnswerverifiedShow Answer

The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately.

Correct AnswerverifiedShow Answer

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Correct AnswerverifiedThe federal government's budget could ha...View AnswerShow Answer

Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes? Explain your answer.

Correct AnswerverifiedThe multiplier for a change in governmen...View AnswerShow Answer

The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.

Correct AnswerverifiedShow Answer

If the Fed lowers the federal funds rate, eventually the

Correct AnswerverifiedShow Answer

If the Fed sells government securities, other interest rates ________ and then exchange rate ________.

Correct AnswerverifiedShow Answer

When tax revenue ________ outlays is positive, then the government has a budget ________.

Correct AnswerverifiedShow Answer

If government expenditure on goods and services increase by $10 billion, then aggregate demand

Correct AnswerverifiedShow Answer

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

Correct AnswerverifiedShow Answer

When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

Correct AnswerverifiedShow Answer

National debt decreases in a given year when a country has

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the Fed is concerned about inflation, its actions long-term interest rates so that investment and net exports .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The FOMC is concerned about inflation and has the federal funds rate. Due to substitution effects, other interest rates will almost immediately.

Correct Answer
verified

Correct Answer
verified
The federal government's budget could ha...
View Answer

Correct Answer
verified
The multiplier for a change in governmen...
View Answer

The supply-side effects of an income tax cut potential GDP and aggregate supply.

Correct Answer
verified

Correct Answer
verified

If the Fed sells government securities, other interest rates and then exchange rate .

Correct Answer
verified

When tax revenue outlays is positive, then the government has a budget .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When the Fed worries about inflation, it the federal funds rate and, in the short run, the real interest rate.

Correct Answer
verified

Correct Answer
verified