Question 1

If the government increases its spending during recession to assist the economy, the funds for such expenditures must come from some source.Which of the following sources would be the most expansionary?

Accepted Answer

A)  additional taxes on personal incomes
B)  creating new money
C)  borrowing from the public
D)  additional taxes upon corporate profitsE) B) and C)
F) A) and C)

Question 2

The actual and full-employment budgets will be equal when the economy is at full-employment.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP)  of $40 is imposed in this economy, we can conclude that the tax:

Accepted Answer

A)  enhances the economy's built-in stability.
B)  reduces the economy's built-in stability.
C)  neither increases nor decreases built-in stability.
D)  increases the MPC and therefore increases the size of the multiplier.E) None of the above
F) A) and B)

Question 4

Refer to the data below.If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is: The following budget information is for a hypothetical economy.All data are in billions of dollars.

Accepted Answer

A)  7.5 percent.
B)  1.39 percent.
C)  2.5 percent.
D)  3.9 percent.E) A) and B)
F) All of the above

Question 5

The largest proportion of the public debt is held by:

Accepted Answer

A)  the Canadian public (individuals, businesses, financial institutions, etc.) .
B)  foreign individuals and institutions.
C)  our central banks.
D)  governmental agencies.E) A) and B)
F) C) and D)

Question 6

International flows of financial capital in response to interest rate changes in Canada:

Accepted Answer

A)  weaken domestic fiscal policy through an offsetting net export effect.
B)  strengthen domestic fiscal policy through a supporting net export effect.
C)  strengthen domestic fiscal policy through an offsetting net export effect.
D)  do none of the above.E) B) and D)
F) A) and D)

Question 7

Expansionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Accepted Answer

A)  A budget deficit
B)  A budget surplus
C)  A decrease in government borrowing costs
D)  An increase in personal taxesE) A) and C)
F) B) and C)

Question 8

The direction of discretionary fiscal policy cannot be examined by a simple look at the changes in the actual budget deficits or surpluses.This is because:

Accepted Answer

A)  those changes may reflect the changes in the general price level.
B)  those changes may reflect automatic changes in the tax revenues as a result of change in GDP.
C)  those changes may reflect the changes in the tax revenues as a result of change in imports.
D)  it is impossible to calculate the changes in the actual budget deficits or surpluses.E) B) and C)
F) C) and D)

Question 9

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases.Full-employment GDP is $120 billion.To obtain price level stability under these conditions the government should:

Accepted Answer

A)  increase tax rates and reduce government spending.
B)  discourage personal saving by reducing the interest rate on government bonds.
C)  increase government expenditures.
D)  encourage private investment by reducing corporate income taxes.E) B) and C)
F) B) and D)

Question 10

Incurring an internal debt to finance a war does not pass the cost of the war on to future generations because:

Accepted Answer

A)  the opportunity cost of wartime expenditures was borne by the generation that lived during the war.
B)  the Federal government can shift expenditures from military goods to the production of other public goods.
C)  the Federal government has the power to levy taxes to pay its debts.
D)  wartime inflation reduces the relative size of the public debt.E) A) and D)
F) All of the above

Question 11

Which combination of fiscal policy actions would most likely be offsetting?

Accepted Answer

A)  increase in taxes and government spending
B)  decrease in taxes and increase in government spending
C)  increase in taxes, but make no change in government spending
D)  decrease in taxes, but make no change in government spendingE) B) and C)
F) A) and D)

Question 12

The crowding-out effect suggests that:

Accepted Answer

A)  increases in consumption are always at the expense of saving.
B)  increases in government spending will close a recessionary gap.
C)  increases in government spending may raise the interest rate and thereby reduce investment.
D)  high taxes reduce both consumption and saving.E) A) and B)
F) B) and C)

Question 13

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:

Accepted Answer

A)  shift the AD curve to the right.
B)  increase the equilibrium GDP.
C)  not affect the AD curve.
D)  shift the AD curve to the left.E) B) and C)
F) C) and D)

Question 14

Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Accepted Answer

A)  Japan
B)  Greece
C)  Italy
D)  CanadaE) B) and D)
F) B) and C)

Question 15

The federal budget deficit is found by:

Accepted Answer

A)  subtracting government tax revenues plus government borrowing from government spending in a particular year.
B)  subtracting government tax revenues from government spending in a particular year.
C)  cumulating the differences between government spending and tax revenues over all years since the nation's founding.
D)  subtracting government revenues from the non-investment-type government spending in a particular year.E) None of the above
F) B) and C)

Question 16

If the cyclically adjusted budget deficit increases from $200 billion to $250 billion and GDP remains constant over the two years:

Accepted Answer

A)  fiscal policy is expansionary.
B)  fiscal policy is contractionary.
C)  fiscal policy is neutral.
D)  the tax system is progressive.E) A) and D)
F) None of the above

Question 17

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP)  of $40 is now imposed in this economy, the consumption schedule will be:

Accepted Answer

A)  Column A
B)  Column B
C)  Column C
D)  Column DE) All of the above
F) A) and B)

Question 18

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Accepted Answer

A)  is $400.
B)  is greater than $400.
C)  is less than $400.
D)  cannot be determined from the information given.E) A) and B)
F) A) and C)

Question 19

Other things equal, which of the policies will have the most expansionary effect on the economy?

Accepted Answer

A)  a balanced budget
B)  a budget surplus held as an idle money balance
C)  a budget deficit financed by creating new money
D)  a budget surplus used for debt retirementE) None of the above
F) C) and D)

Question 20

In Year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit was $150 billion.In Year 2, the actual budget deficit was $225 billion and the cyclically adjusted deficit was $175 billion.It can be concluded that fiscal policy from Year 1 to Year 2 was:

Accepted Answer

A)  proportional.
B)  inflationary.
C)  contractionary.
D)  expansionaryE) A) and D)
F) B) and D)

Exam 13: B: Fiscal Policy, Deficits, Surpluses, and Debt

The direction of discretionary fiscal policy cannot be examined by a simple look at the changes in the actual budget deficits or surpluses.This is because:

Correct Answer
verified

If the government increases its spending during recession to assist the economy, the funds for such expenditures must come from some source.Which of the following sources would be the most expansionary?

Correct Answer
verified

Which combination of fiscal policy actions would most likely be offsetting?

Correct Answer
verified

In Year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit was $150 billion.In Year 2, the actual budget deficit was $225 billion and the cyclically adjusted deficit was $175 billion.It can be concluded that fiscal policy from Year 1 to Year 2 was:

Correct Answer
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If the cyclically adjusted budget deficit increases from $200 billion to $250 billion and GDP remains constant over the two years:

Correct Answer
verified

Refer to the data below.If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is: The following budget information is for a hypothetical economy.All data are in billions of dollars.

Correct Answer
verified

Other things equal, which of the policies will have the most expansionary effect on the economy?

Correct Answer
verified

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:

Correct Answer
verified

The largest proportion of the public debt is held by:

Correct Answer
verified

Incurring an internal debt to finance a war does not pass the cost of the war on to future generations because:

Correct Answer
verified

International flows of financial capital in response to interest rate changes in Canada:

Correct Answer
verified

The crowding-out effect suggests that:

Correct Answer
verified

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, we can conclude that the tax:

Correct Answer
verified

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Correct Answer
verified

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is now imposed in this economy, the consumption schedule will be:

Correct Answer
verified

The actual and full-employment budgets will be equal when the economy is at full-employment.

Correct Answer
verified

Expansionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Correct Answer
verified

Correct Answer
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Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Correct Answer
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The federal budget deficit is found by:

Correct Answer
verified

Exam 13: B: Fiscal Policy, Deficits, Surpluses, and Debt

The direction of discretionary fiscal policy cannot be examined by a simple look at the changes in the actual budget deficits or surpluses.This is because:

Correct AnswerverifiedShow Answer

If the government increases its spending during recession to assist the economy, the funds for such expenditures must come from some source.Which of the following sources would be the most expansionary?

Correct AnswerverifiedShow Answer

Which combination of fiscal policy actions would most likely be offsetting?

Correct AnswerverifiedShow Answer

In Year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit was $150 billion.In Year 2, the actual budget deficit was $225 billion and the cyclically adjusted deficit was $175 billion.It can be concluded that fiscal policy from Year 1 to Year 2 was:

Correct AnswerverifiedShow Answer

If the cyclically adjusted budget deficit increases from $200 billion to $250 billion and GDP remains constant over the two years:

Correct AnswerverifiedShow Answer

Refer to the data below.If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is: The following budget information is for a hypothetical economy.All data are in billions of dollars.

Correct AnswerverifiedShow Answer

Other things equal, which of the policies will have the most expansionary effect on the economy?

Correct AnswerverifiedShow Answer

In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will:

Correct AnswerverifiedShow Answer

The largest proportion of the public debt is held by:

Correct AnswerverifiedShow Answer

Incurring an internal debt to finance a war does not pass the cost of the war on to future generations because:

Correct AnswerverifiedShow Answer

International flows of financial capital in response to interest rate changes in Canada:

Correct AnswerverifiedShow Answer

The crowding-out effect suggests that:

Correct AnswerverifiedShow Answer

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is imposed in this economy, we can conclude that the tax:

Correct AnswerverifiedShow Answer

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Correct AnswerverifiedShow Answer

Refer to the above data.If a lump-sum tax (the same tax amount at each level of GDP) of $40 is now imposed in this economy, the consumption schedule will be:

Correct AnswerverifiedShow Answer

The actual and full-employment budgets will be equal when the economy is at full-employment.

Correct AnswerverifiedShow Answer

Expansionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Correct AnswerverifiedShow Answer

The federal budget deficit is found by:

Correct AnswerverifiedShow Answer

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