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Exam 13: Fiscalpolicy

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Question 61

Multiple Choice

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During a recession, government deficits grow because:

A) government spending often increases as part of expansionary fiscal policy.
B) income tax revenues tend to decrease due to people earning less.
C) sales tax revenues tend to decrease due to people spending less.
D) All of these are reasons why government deficits grow during a recession.

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Question 62

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With the economy booming, the government starts to worry about the increasing rate of inflation, and decides to cut its spending on highway maintenance and defer it to the future. This is an example of:

A) an automatic stabilizer.
B) discretionary fiscal policy.
C) expansionary fiscal policy.
D) None of these are true.

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Question 63

Multiple Choice

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Ricardian equivalence predicts that:

If the government wished to shift aggregate demand to the left, it might:

What is the impact of contractionary fiscal policy on prices and output?

Contractionary fiscal policy occurs when the overall effect of decisions about taxation and spending is to:

Effective fiscal policy can be difficult to enact because:

What is the impact of expansionary fiscal policy on prices and output?

The direct cost of public debt depends on:

Which statement describes the effect of crowding out?

During parts of the Roaring 20s, the stock market increased by 20 percent per year, and the overall economy grew by 40 percent over the course of the decade. In response, the government should have:

Deficits count government spending shortfalls _______, while public debt counts _______.

The existing tax rates on income in the United States:

All else equal, Ricardian equivalence predicts that people in an economy will have a low _______ in response to a tax cut.

Suppose the country of Piedmont borrows money to start a brand-new infrastructure program. GDP is currently $400 billion. The plan will take the public debt from $250 billion to $350 billion in ten years, when GDP is projected to be $425 billion. What is the current debt as a percentage of GDP?

The graph shown displays various economic outcomes. At which equilibrium would the government most likely decide to decrease taxes?

Who convinced the only two banks in the United States to lend money for the first time to the U.S. government?

If the government were to increase spending, aggregate _______ would shift to the _______.

If congressional policymakers aim to increase aggregate demand, they will likely enact:

Keynesian policy: