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Chapter 13 HW Qs

A group of three economists appointed by the president to provide fiscal policy recommendations is the:
Council of Economic Advisers
Discretionary fiscal policy refers to:
intentional changes in taxes and government expenditures made by Congress to stabilize the economy.
Countercyclical discretionary fiscal policy calls for:
deficits during recessions and surpluses during periods of demand-pull inflation
Fiscal policy refers to the:
deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level
Expansionary fiscal policy is so named because it:
is designed to expand real GDP
Contractionary fiscal policy is so named because it:
is aimed at reducing aggregate demand and thus achieving price stability
An economist who favors smaller government would recommend:
tax cuts during recession and tax cuts during inflation
An economist who favored expanded government would recommend:
increases in government spending during recession and tax increases during inflation
Discretionary fiscal policy will stabilize the economy most when:
deficits are incurred during recessions and surpluses during inflations
Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward:
an excess of government expenditures over tax receipts
Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?
reductions in federal tax rates on personal and corporate income
Which of the following represents the most expansionary fiscal policy?
a $10 billion increase in government spending
Which of the following represents the most contractionary fiscal policy?
a $30 billion decrease in government spending
A contractionary fiscal policy is shown as a:
leftward shift in the economy’s aggregate demand curve
An expansionary fiscal policy is shown as a:
rightward shift in the economy’s aggregate demand curve
Built-in stability means that:
with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will in a deficit or a lower budget surplus
A major advantage of the built-in or automatic stabilize is that they:
require no legislative action by Congress to be made effective
Which of the following best describes the built-in stabilizers as they function in the U.S.?
personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises
The cyclically adjusted budget tells us:
what the size of the federal budget deficit or surplus would be if the economy was at full employment
When occurring government expenditures exceed current tax revenues and the economy is achieving full employment:
the cyclically adjusted budget has a deficit
When current tax revenues exceed government expenditures and the economy is achieving full employment:
the cyclically adjusted budget has a surplus
An effective expansionary fiscal policy will:
increase the cyclically adjusted deficit but reduce the actual deficit
Economists refer to a budget deficit that exists when the economy is achieving full employment as a:
cyclically adjusted budget
The federal budget deficit is found by:
subtracting government tax revenues from government spending in a particular year
The amount by which government expenditures exceed revenues during a particular year is the:
budget deficit
The amount by which federal tax revenues exceed federal government expenditures during a particular year is the:
budget surplus
Which of the following best describes the idea of a political business cycle:
politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections
The political business cycle refers to the possibility that:
politicians will manipulate the economy to enhance their chances of being reelected
The crowding-out effect of expansionary fiscal policy suggests that:
increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment
The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes:
the crowding-out effect
The U.S. public debt:
consists of the historical accumulation of all past federal deficits and surpluses
The public debt is the amount of money that:
the federal government owes to holders of U.S. securities
The public debt is held as:
Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds
Recessions have contributed to the public debt by:
reducing national income and therefore tax revenues
In 2002, the U.S. federal debt held by the public was:
about 70% of the size of the GDP
In 2012, the U.S. public debt was about:
$16.4 billion
What percentage of the U.S. public debt is held by federal agencies and the Federal Reserve?
Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions?
To say that “the U.S. public debt is mostly held internally” is to say that:
the bulk of the public debt is owned by U.S. citizens and institutions
The federal government has a large public debt that it finances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This illustrates the:
crowding-out effect

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