Question 1

Countercyclical fiscal policy consists of using expansionary fiscal policy

Accepted Answer

A)   during times of expansion and contractionary fiscal policy during times of recession.
B)   during times of recession and contractionary fiscal policy during times of recession.
C)   during times of expansion and contractionary fiscal policy during times of expansion.
D)   during times of recession and contractionary fiscal policy during times of expansion.
E)   and contractionary fiscal policy at the same time.

Question 2

During a recession,the government's budget deficit tends to ________,and the level of the national debt tends to ________.

Accepted Answer

A)   decrease; decrease
B)   increase; decrease
C)   increase; increase
D)   decrease; increase
E)   remain unchanged; remain unchanged

Question 3

Consider the following list of government policies. 
i. welfare programs
ii. student loans
iii. lower income tax rates
iv. progressive income tax rates
v. unemployment compensation
vi. tax credits for research and development
Which are examples of supply-side fiscal policies?

Accepted Answer

A)   ii and vi
B)   i,iv,and v
C)   ii,iii,and vi
D)   ii,iii,iv,and vi
E)   i,iii,iv,and v

Question 4

Country Z is suffering from the effects of a negative supply shock.If the government's main goal is to return output to potential,then it will ________.If the government's main goal is to maintain low and stable inflation,then it will ________.

Accepted Answer

A)   pursue expansionary fiscal policy; take no action
B)   pursue contractionary fiscal policy; pursue expansionary fiscal policy
C)   pursue contractionary fiscal policy; take no action
D)   pursue expansionary fiscal policy; pursue expansionary fiscal policy
E)   take no action; take no action

Question 5

Draw two different business cycles on the same graph.Show one without countercyclical fiscal policy and one with countercyclical fiscal policy.Referring to your diagram,discuss why governments employ countercyclical fiscal policy.

Accepted Answer

The use of countercyclical fiscal policy...

Question 6

Monetary policy is conducted by the Federal Reserve.Fiscal policy is

Accepted Answer

A)   also conducted by the Federal Reserve.
B)   conducted by Congress and the president.
C)   conducted by the Supreme Court.
D)   conducted by the Department of Defense.
E)   conducted only at the state level.

Question 7

Write a short explanation of supply-side fiscal policy; include a long-run aggregate supply (LRAS)curve as further illustration.

Accepted Answer

Supply-side fiscal policy involves the use of government spending and taxes to affect the production (supply)side of the economy.Examples of supply-side fiscal policy would be research and development tax credits as well as policies that focus on education.Unlike typical fiscal policy,supply-side fiscal policy focuses on initiatives that will shift the long-run aggregate supply curve to the right.This will increase the full-employment output level as shown in the following figure:

Question 8

It takes time for the complete effects of monetary and fiscal policy to materialize.This is because there is a(n) ________ lag between setting fiscal policy and seeing its effects.

Accepted Answer

A)   recognition
B)   implementation
C)   impact
D)   countercyclical
E)   automatic

Question 9

Generally,________ public figures tend to stress Region II of the Laffer curve,where tax rate reductions lead to ________ tax revenue.________ emphasize Region I,where tax rate increases lead to ________ tax revenue.Both regions are important for economic policy.

Accepted Answer

A)   conservative; increased; Liberals; more
B)   conservative; decreased; Liberals; more
C)   liberal; increased; Conservatives; less
D)   no; increased; Liberals and conservatives; less
E)   liberal and conservative; decreased; Neither liberals nor conservatives; more

Question 10

The goal of contractionary fiscal policy is to shift the ________ curve to the ________.

Accepted Answer

A)   aggregate demand; left
B)   aggregate demand; right
C)   short-run aggregate supply; right
D)   short-run aggregate supply; left
E)   long-run aggregate supply; left

Question 11

An implementation lag happens because

Accepted Answer

A)   it is easy to implement fiscal policy.
B)   it is difficult to determine when the economy is turning up or down.
C)   in most nations,one or more governing bodies must approve government spending or new tax policies.
D)   it takes time for the complete effects of monetary and fiscal policy to materialize.
E)   it is impossible to implement fiscal policy with a divided House of Representatives and Senate.

Question 12

Changes in fiscal policy are ________ effective the ________ the value of the marginal propensity to consume.

Accepted Answer

A)   more; larger
B)   more; smaller
C)   equally; larger
D)   not; larger
E)   less; larger

Question 13

When the government decreases spending or increases taxes to slow economic expansion,the government is conducting ________ policy.

Accepted Answer

A)   expansionary monetary
B)   expansionary fiscal
C)   contractionary monetary
D)   contractionary fiscal
E)   neither monetary policy nor fiscal D

Question 14

During a recession,tax revenue collected by the government will ________,and transfer payments paid by the government will ________.

Accepted Answer

A)   decrease; decrease
B)   increase; decrease
C)   increase; increase
D)   decrease; increase
E)   remain unchanged; remain unchanged

Question 15

The Laffer curve shows that

Accepted Answer

A)   tax revenue is maximized at multiple tax rates.
B)   tax revenue is constant overall tax rates.
C)   tax revenue increases as tax rates increase.
D)   at some specific tax rate,tax revenue is maximized.
E)   tax revenue decreases as tax rates increase. D

Question 16

The spending multiplier is

Accepted Answer

A)   a formula to determine the total impact on savings from an initial change of a given amount.
B)   a formula to determine the total impact on consumption from an initial change of a given amount.
C)   only used when government spending increases.
D)   a formula to determine the total impact on spending from an initial change of a given amount.
E)   only used when government spending decreases.

Question 17

If your income increases by $1,500 and you only consume $900 of it,your marginal propensity to consume would be equal to

Accepted Answer

A)   600.00.
B)   0.50.
C)   0.75.
D)   0.40.
E)   0.60.

Question 18

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Accepted Answer

A)   contractionary fiscal
B)   expansionary monetary
C)   contractionary monetary
D)   expansionary fiscal
E)   countercyclical monetary

Question 19

Refer to the following figure to answer the following questions. 
-According to the figure,the amount of private investment after government borrowing is ________ billion.

Accepted Answer

A)   $50
B)   $25
C)   $100
D)   $150
E)   $275

Question 20

An economy's potential output is equal to $22 billion,and its current output is equal to $20 billion.If the marginal propensity to consume has a value of 0.9,then the government should increase spending by ________ billion to return the economy to the long-run equilibrium.

Accepted Answer

A)   $0.2
B)   $1.8
C)   $2
D)   $10
E)   $1

Exam 29: Fiscal Policy

Countercyclical fiscal policy consists of using expansionary fiscal policy

Correct Answer
verified

During a recession,the government's budget deficit tends to ,and the level of the national debt tends to .

Correct Answer
verified

Consider the following list of government policies. i. welfare programs ii. student loans iii. lower income tax rates iv. progressive income tax rates v. unemployment compensation vi. tax credits for research and development Which are examples of supply-side fiscal policies?

Correct Answer
verified

Country Z is suffering from the effects of a negative supply shock.If the government's main goal is to return output to potential,then it will .If the government's main goal is to maintain low and stable inflation,then it will .

Correct Answer
verified

Draw two different business cycles on the same graph.Show one without countercyclical fiscal policy and one with countercyclical fiscal policy.Referring to your diagram,discuss why governments employ countercyclical fiscal policy.

Correct Answer
verified
The use of countercyclical fiscal policy...
View Answer

Monetary policy is conducted by the Federal Reserve.Fiscal policy is

Correct Answer
verified

Write a short explanation of supply-side fiscal policy; include a long-run aggregate supply (LRAS)curve as further illustration.

It takes time for the complete effects of monetary and fiscal policy to materialize.This is because there is a(n) ________ lag between setting fiscal policy and seeing its effects.

Correct Answer
verified

Generally, public figures tend to stress Region II of the Laffer curve,where tax rate reductions lead to tax revenue. emphasize Region I,where tax rate increases lead to tax revenue.Both regions are important for economic policy.

Correct Answer
verified

The goal of contractionary fiscal policy is to shift the curve to the .

Correct Answer
verified

An implementation lag happens because

Correct Answer
verified

Changes in fiscal policy are effective the the value of the marginal propensity to consume.

Correct Answer
verified

When the government decreases spending or increases taxes to slow economic expansion,the government is conducting ________ policy.

Correct Answer
verified
D

During a recession,tax revenue collected by the government will ,and transfer payments paid by the government will .

Correct Answer
verified

The Laffer curve shows that

Correct Answer
verified
D

The spending multiplier is

Correct Answer
verified

If your income increases by $1,500 and you only consume $900 of it,your marginal propensity to consume would be equal to

Correct Answer
verified

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Correct Answer
verified

Refer to the following figure to answer the following questions. -According to the figure,the amount of private investment after government borrowing is ________ billion.

Correct Answer
verified

An economy's potential output is equal to $22 billion,and its current output is equal to $20 billion.If the marginal propensity to consume has a value of 0.9,then the government should increase spending by ________ billion to return the economy to the long-run equilibrium.

Correct Answer
verified

Exam 29: Fiscal Policy

Countercyclical fiscal policy consists of using expansionary fiscal policy

Correct AnswerverifiedShow Answer

During a recession,the government's budget deficit tends to ________,and the level of the national debt tends to ________.

Correct AnswerverifiedShow Answer

Consider the following list of government policies. i. welfare programs ii. student loans iii. lower income tax rates iv. progressive income tax rates v. unemployment compensation vi. tax credits for research and development Which are examples of supply-side fiscal policies?

Correct AnswerverifiedShow Answer

Country Z is suffering from the effects of a negative supply shock.If the government's main goal is to return output to potential,then it will ________.If the government's main goal is to maintain low and stable inflation,then it will ________.

Correct AnswerverifiedShow Answer

Draw two different business cycles on the same graph.Show one without countercyclical fiscal policy and one with countercyclical fiscal policy.Referring to your diagram,discuss why governments employ countercyclical fiscal policy.

Correct AnswerverifiedThe use of countercyclical fiscal policy...View AnswerShow Answer

Monetary policy is conducted by the Federal Reserve.Fiscal policy is

Correct AnswerverifiedShow Answer

Write a short explanation of supply-side fiscal policy; include a long-run aggregate supply (LRAS)curve as further illustration.

It takes time for the complete effects of monetary and fiscal policy to materialize.This is because there is a(n) ________ lag between setting fiscal policy and seeing its effects.

Correct AnswerverifiedShow Answer

Generally,________ public figures tend to stress Region II of the Laffer curve,where tax rate reductions lead to ________ tax revenue.________ emphasize Region I,where tax rate increases lead to ________ tax revenue.Both regions are important for economic policy.

Correct AnswerverifiedShow Answer

The goal of contractionary fiscal policy is to shift the ________ curve to the ________.

Correct AnswerverifiedShow Answer

An implementation lag happens because

Correct AnswerverifiedShow Answer

Changes in fiscal policy are ________ effective the ________ the value of the marginal propensity to consume.

Correct AnswerverifiedShow Answer

When the government decreases spending or increases taxes to slow economic expansion,the government is conducting ________ policy.

Correct AnswerverifiedD

During a recession,tax revenue collected by the government will ________,and transfer payments paid by the government will ________.

Correct AnswerverifiedShow Answer

The Laffer curve shows that

Correct AnswerverifiedD

The spending multiplier is

Correct AnswerverifiedShow Answer

If your income increases by $1,500 and you only consume $900 of it,your marginal propensity to consume would be equal to

Correct AnswerverifiedShow Answer

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.

Correct AnswerverifiedShow Answer

Refer to the following figure to answer the following questions. -According to the figure,the amount of private investment after government borrowing is ________ billion.

Correct AnswerverifiedShow Answer

An economy's potential output is equal to $22 billion,and its current output is equal to $20 billion.If the marginal propensity to consume has a value of 0.9,then the government should increase spending by ________ billion to return the economy to the long-run equilibrium.

Correct AnswerverifiedShow Answer

Correct Answer
verified

During a recession,the government's budget deficit tends to ,and the level of the national debt tends to .

Correct Answer
verified

Correct Answer
verified

Country Z is suffering from the effects of a negative supply shock.If the government's main goal is to return output to potential,then it will .If the government's main goal is to maintain low and stable inflation,then it will .

Correct Answer
verified

Correct Answer
verified
The use of countercyclical fiscal policy...
View Answer

Correct Answer
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Correct Answer
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Generally, public figures tend to stress Region II of the Laffer curve,where tax rate reductions lead to tax revenue. emphasize Region I,where tax rate increases lead to tax revenue.Both regions are important for economic policy.

Correct Answer
verified

The goal of contractionary fiscal policy is to shift the curve to the .

Correct Answer
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Correct Answer
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Changes in fiscal policy are effective the the value of the marginal propensity to consume.

Correct Answer
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Correct Answer
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D

During a recession,tax revenue collected by the government will ,and transfer payments paid by the government will .

Correct Answer
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Correct Answer
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D

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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