Question 1

The graph shown displays various economic outcomes.  At which equilibrium would the government likely enact contractionary fiscal policy?

Accepted Answer

A)   Point A
B)   Point B
C)   Point C
D)   Point DE) A) and C)
F) A) and B)

Question 2

Fiscal policy is often difficult to successfully implement because:

Accepted Answer

A)   there is a lag between the time the policy is chosen and when it gets enacted.
B)   a decision must be made without all the relevant information.
C)   there is a risk of overshooting or undershooting the goal of full employment.
D)   All of these are true.E) B) and D)
F) All of the above

Question 3

Fiscal policy most directly affects the economy by increasing or decreasing:

Accepted Answer

A)   aggregate demand.
B)   the interest rate.
C)   long-run aggregate supply.
D)   the money supply.E) B) and C)
F) C) and D) A

Question 4

Who buys U.S. Treasury securities? I. U.S. individuals
II. Foreign governments
III. Foreign investors
IV. U.S. banks
V. U.S. firms

Accepted Answer

A)   I, IV, and V only
B)   II and III only
C)   I, III, IV, and V only
D)   All of the above.E) All of the above
F) A) and C)

Question 5

Sam earns $45,000 per year working at the IRS. Between state and federal taxes, his income is taxed at 35 percent. What is his disposable income?

Accepted Answer

A)   $45,000
B)   $15,750
C)   $29,250
D)   $35,000E) C) and D)
F) All of the above

Question 6

The graph shown displays various economic outcomes.  If the economy is currently at equilibrium D, to bring the economy back to its long-run equilibrium the government might:

Accepted Answer

A)   decrease spending.
B)   decrease income taxes.
C)   increase corporate income taxes.
D)   All of these would move the economy back to its long-run equilibrium from point D.E) A) and C)
F) None of the above

Question 7

A budget deficit is the:

Accepted Answer

A)   amount of money a government spends beyond the net revenue it brings in.
B)   amount of net revenue a government brings in beyond what it spends.
C)   total amount of money that a government owes to creditors.
D)   total amount of money that a government spends on discretionary policies.E) B) and C)
F) A) and D) A

Question 8

If the government increases the income tax rate:

Accepted Answer

A)   disposable income will decrease.
B)   disposable income will increase.
C)   disposable income will be unaffected.
D)   total income will increase.E) A) and B)
F) None of the above

Question 9

The table shown displays information about a country's public debt.  Which year has the highest debt as a percentage of GDP?

Accepted Answer

A)   2000
B)   2010
C)   2020
D)   2030E) B) and D)
F) B) and C)

Question 10

When an initial spending change causes a larger change in overall output, this exemplifies:

Accepted Answer

A)   the multiplier effect.
B)   crowding out.
C)   the income effect.
D)   the substitution effect.E) A) and D)
F) B) and D) A

Question 11

Which of the following is not an example of fiscal policy?

Accepted Answer

A)   The Federal Reserve cuts interest rates to stimulate the economy in a recession.
B)   The government increases spending on infrastructure development.
C)   Congress passes new legislation, cutting the corporate income tax.
D)   During an economic expansion, the state of New York collects higher payroll taxes.E) A) and C)
F) A) and B)

Question 12

After running the numbers on a new Green Job plan, the CBO projects that the government _______ will increase by $40 billion each year, and _______ will increase $400 billion over the project's lifespan.

Accepted Answer

A)   debt; the deficit
B)   debt; transfer payments
C)   deficit; debt
D)   deficit; transfer paymentsE) None of the above
F) C) and D)

Question 13

The government budget includes money:

Accepted Answer

A)   coming in as tax revenues.
B)   going out through government purchases.
C)   going out to individuals for programs that do not transfer goods or services.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 14

When output deviates from potential GDP, automatic stabilizers work to push the economy:

Accepted Answer

A)   in the same direction that correctly timed and formulated discretionary policy would.
B)   to lower rates of inflation.
C)   away from risky financial investments.
D)   None of these.E) B) and C)
F) B) and D)

Question 15

People, banks, and governments invest in U.S. securities mainly because of the:

Accepted Answer

A)   high rate of interest.
B)   high returns.
C)   low risk of owning them.
D)   varied time frames of payment.E) None of the above
F) A) and B)

Question 16

One reason the government will enact fiscal policy instead of waiting for the economy to correct itself is because the automatic adjustment:

Accepted Answer

A)   can take a very long time.
B)   leads to a lower level of potential GDP.
C)   will cause inflation.
D)   causes greater turbulence in the economy.E) A) and B)
F) None of the above

Question 17

Disposable income is:

Accepted Answer

A)   total income minus taxes.
B)   total income plus taxes.
C)   total income minus depreciation.
D)   None of these are true.E) B) and D)
F) All of the above

Question 18

The table shown displays information about a country's public debt.  What is the debt as a percentage of GDP in 2000?

Accepted Answer

A)   70 percent
B)   72.5 percent
C)   75 percent
D)   80 percentE) A) and B)
F) A) and C)

Question 19

Fitch Ratings, a credit rating agency, recently downgraded Vermont's debt rating from AAA to AA+, citing the state's economy and changing demographics. This change could:

Accepted Answer

A)   increase the direct costs of the state's debt.
B)   increase private investment.
C)   cause the state to invest in more Treasury securities.
D)   None of these is likely to occur.E) C) and D)
F) A) and C)

Question 20

When the government decides to enact fiscal policy:

Accepted Answer

A)   full information must have been readily available before the decision was made.
B)   the expedited process of approval aids with quick enactment.
C)   the economy moves closer to potential GDP than it otherwise would.
D)   implementation of the policy may take time.E) None of the above
F) A) and B)

Exam 13: Fiscalpolicy

The graph shown displays various economic outcomes. At which equilibrium would the government likely enact contractionary fiscal policy?

Correct AnswerverifiedShow Answer

Fiscal policy is often difficult to successfully implement because:

Correct AnswerverifiedShow Answer

Fiscal policy most directly affects the economy by increasing or decreasing:

Correct AnswerverifiedA

Who buys U.S. Treasury securities? I. U.S. individuals II. Foreign governments III. Foreign investors IV. U.S. banks V. U.S. firms

Correct AnswerverifiedShow Answer

Sam earns $45,000 per year working at the IRS. Between state and federal taxes, his income is taxed at 35 percent. What is his disposable income?

Correct AnswerverifiedShow Answer

The graph shown displays various economic outcomes. If the economy is currently at equilibrium D, to bring the economy back to its long-run equilibrium the government might:

Correct AnswerverifiedShow Answer

A budget deficit is the:

Correct AnswerverifiedA

If the government increases the income tax rate:

Correct AnswerverifiedShow Answer

The table shown displays information about a country's public debt. Which year has the highest debt as a percentage of GDP?

Correct AnswerverifiedShow Answer

When an initial spending change causes a larger change in overall output, this exemplifies:

Correct AnswerverifiedA

Which of the following is not an example of fiscal policy?

Correct AnswerverifiedShow Answer

After running the numbers on a new Green Job plan, the CBO projects that the government _______ will increase by $40 billion each year, and _______ will increase $400 billion over the project's lifespan.

Correct AnswerverifiedShow Answer

The government budget includes money:

Correct AnswerverifiedShow Answer

When output deviates from potential GDP, automatic stabilizers work to push the economy:

Correct AnswerverifiedShow Answer

People, banks, and governments invest in U.S. securities mainly because of the:

Correct AnswerverifiedShow Answer

One reason the government will enact fiscal policy instead of waiting for the economy to correct itself is because the automatic adjustment:

Correct AnswerverifiedShow Answer

Disposable income is:

Correct AnswerverifiedShow Answer

The table shown displays information about a country's public debt. What is the debt as a percentage of GDP in 2000?

Correct AnswerverifiedShow Answer

Fitch Ratings, a credit rating agency, recently downgraded Vermont's debt rating from AAA to AA+, citing the state's economy and changing demographics. This change could:

Correct AnswerverifiedShow Answer

When the government decides to enact fiscal policy:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

After running the numbers on a new Green Job plan, the CBO projects that the government _ will increase by $40 billion each year, and _ will increase $400 billion over the project's lifespan.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified