Chapter 18, Assignment 1
B
After September 11, 2001, the federal government increased military spending on wars in Iraq and Afghanistan. Is this increase in spending considered fiscal policy? A) Yes. Fiscal policy refers to changes in government spending and taxes. B) No. The increase in defense spending after that date was designed to achieve homeland security objectives. C) Yes. Increases in defense spending are designed to achieve macroeconomic policy objectives. D) No. Fiscal policy refers to changes in interest rates and the money supply.
C
Are federal expenditures higher today than they were in 1960? A) As a percentage of GDP, federal expenditures have decreased since 1960. B) As a percentage of GDP, federal expenditures have remained unchanged since 1960. C) As a percentage of GDP, federal expenditures have increased since 1960.
B
Are federal purchases higher today than they were in 1960? A) As a percentage of GDP, federal purchases have increased since 1960. B) As a percentage of GDP, federal purchases have decreased since 1960. C) As a percentage of GDP, federal purchases have remained unchanged since 1960.
C
Automatic stabilizers can reduce the severity of a recession because, during a recession, A) social security payments and student loan subsidies rise, providing more spending ability to push the economy back to full employment. B) social security payments rise and tax collections fall, providing more spending ability to push the economy back to full employment. C) unemployment payments rise and tax collections fall, providing more spending ability to push the economy back to full employment. D) student loan subsidies rise and tax collections fall, providing more spending ability to push the economy back to full employment.
C
Changes in taxes and spending that happen without actions by the government are called A) autonomous fiscal expenditures. B) transfer payments. C) automatic stabilizers. D) discretionary fiscal policy changes.
C
Congress and the president enact a temporary cut in payroll taxes. This is an example of A) an automatic stabilizer. B) not a fiscal policy. C) a discretionary fiscal policy.
A
Economist Mark Thoma has written, "One of the difficulties in using fiscal policy to combat recessions is getting Congress to agree on what measures to implement. ... Automatic stabilizers bypass this difficulty by doing exactly what their name implies." Source: Mark Thoma, "The Importance of Automatic Stabilizers to the Economy," cbsnews.com, January 25, 2010. Automatic stabilizers are A) government spending and taxes that automatically increase or decrease along with the business cycle. B) changes in business taxes that occur when the economy slows down. C) changes in the money supply that occur automatically when money demand changes. D) budgetary cuts that occur automatically at the end of the fiscal year if there is a deficit.
A
Economists use the term fiscal policy to refer to changes in taxing and spending policies A) only by the federal government. B) only by state and local governments. C) by all levels of government, federal, state, and local. D) by none of the above.
B
If the government cuts taxes in order to increase aggregate demand, the action is called A) a procyclical policy. B) a discretionary fiscal policy. C) a discretionary monetary policy. D) an automatic stabilizer.
A
In 2009, Congress and the president enacted "cash for clunkers" legislation that paid people buying new cars up to $4,500 if they traded in an older, low gas-mileage car. Was this piece of legislation an example of fiscal policy? A) Yes, because the primary goal of the spending program was to stimulate the national economy. B) Yes, because any government spending program is, by definition, a fiscal policy. C) No, because the program did not have any effect on the national economy. D) No, because the effect of the spending program was to increase the gas mileage of cars currently on the road.
D
Since World War II, the federal government's share of total government expenditures has been between A) one-third and two-thirds. B) one-half and two-thirds. C) one-quarter and one-half. D) two-thirds and three-quarters.
B
Some spending and taxes increase or decrease with the business cycle. This event often has an effect on the economy that is similar to fiscal policy and is called A) discretionary fiscal policy. B) automatic stabilizers. C) monetary policy. D) transfer payments.
B
The Federal Reserve sells Treasury securities. This is an example of A) a discretionary fiscal policy. B) not a fiscal policy. C) an automatic stabilizer.
C
The federal government changes the required gasoline mileage for new cars. This is an example of A) a discretionary fiscal policy. B) an automatic stabilizer. C) not a fiscal policy.
B
The federal government collected less in total individual income taxes in 1983 than in 1982. Can we conclude that Congress and the president cut individual income tax rates in 1983? A) No. The tax rates might have stayed the same, but the process of collection may have changed. B) No. It could be that the economy contracted, so less income was earned and less was paid in tax. C) Yes. Since the same number of people would be paying taxes, if tax collection was down, the tax rate must have been cut. D) Yes. Since the same amount of income was earned, if tax collection was down, the tax rate must have been cut.
C
The federal government increases spending on rebuilding the New Jersey shore following a hurricane. This is an example of A) a discretionary fiscal policy. B) an automatic stabilizer. C) not a fiscal policy.
C
The federal government's day-to-day activities include running federal agencies like the Environmental Protection Agency, the FBI, the National Park Service, and the Immigration and Customs Enforcement. Spending on these types of activities make up A) about 85 percent of federal government expenditures. B) about 45 percent of federal government expenditures. C) less than 10 percent of federal government expenditures. D) less than 1 percent of federal government expenditures.
D
The largest and fastest-growing category of federal expenditures is A) grants to state and local governments. B) defense spending. C) interest on the national debt. D) transfer payments.
A
The major cause of these trends is A) there has been a major increase in the amount of transfer payments the government makes through programs such as Social Security and unemployment insurance. B) there has been a decrease in income tax rates for most households in the U.S. C) there has been a reduction in the nominal amount of government purchases on military as the U.S. does not engage in military conflicts. D) All of the above.
C
The revenue the federal government collects from the individual income tax declines during a recession. This is an example of A) a discretionary fiscal policy. B) not a fiscal policy. C) an automatic stabilizer.
A
The total the federal government pays out for unemployment insurance decreases during an expansion. This is an example of A) an automatic stabilizer. B) not a fiscal policy. C) a discretionary fiscal policy.
B
Two examples of automatic stabilizers in the U.S. are A) social security payments and the regressive income tax system. B) unemployment insurance payments and the progressive income tax system. C) the proportional income tax system and student loan subsidies. D) social security payments and the proportional income tax system.
D
What is fiscal policy? A) Fiscal policy can be described as changes in government spending and interest rates to achieve macroeconomic policy objectives. B) Fiscal policy can be described as changes in interest rates and taxes to achieve macroeconomic policy objectives. C) Fiscal policy can be described as changes in interest rates to achieve macroeconomic policy objectives. D) Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives. Your answer is correct.
A
What is the difference between federal government purchases (spending) and federal government expenditures? A) Government purchases are included in government expenditures. B) Government purchases refer to spending for which no good or service is received. C) Government expenditures are included in government purchases. D) They are the same.
A
What is the difference between federal purchases and federal expenditures? A) Federal purchases require that the government receives a good or service in return, whereas federal expenditures include transfer payments. B) The difference between federal purchases and federal expenditures is so small that it is generally ignored. C) Federal purchases require that the government receives a good or service in return, whereas federal expenditures exclude transfer payments. D) Federal purchases and federal expenditures both require that the government receives a good or service in return.
B
When the economy is experiencing an expansion automatic stabilizers will cause: A) transfer payments to decrease and tax revenues to decrease. B) transfer payments to decrease and tax revenues to increase. C) transfer payments and tax revenues to be unaffected. D) transfer payments to increase and tax revenues to increase.
D
Which of the following are categories of federal government expenditures? A) grants to state and local governments B) interest on the national debt C) transfer payments D) All of the above.
D
Who is responsible for fiscal policy? A) The federal government and the Federal Reserve jointly control fiscal policy. B) Fiscal policy is controlled by market forces. C) The Federal Reserve controls fiscal policy. D) The federal government controls fiscal policy.
