Econe Chapter 15 Study Questions

The concepts of "self-interest" and "free markets" are the primary components of

Classical economics

The government agency that provides economic data to Congress is the

Congressional Budget Office (CBO).

The Office of Management and Budget (OMB) is part of the

Executive Office of the President

Government spending and revenue collection used to influence the economy is referred to as

Federal budget

Which limit of fiscal policy would describe why it is risky to assume people will respond the same way to a tax as they have in the past?

Predicting the future

Which of the following are known as automatic stabilizers?

Taxes and transfer payments

Which is a short-term bond that must be paid within a year or less?

Treasury bill

When government revenues and expenditures are equal, there is

a balanced budget.

A treasury bond is

a government bond that can be issued for as long as 30 years.

A Treasury note is

a government bond that is repaid within two to ten years.

Which of the following might be part of an expansionary policy?

a tax cut

A government program that changes automatically depending on GDP and a person's income is an example of

an automatic stabilizer.

A bill that sets money aside for specific spending is a(n)

appropriations bill

According to the Laffer curve,

both a high and low tax rate can produce the same revenues

A situation in which the government spends more than it takes in is a

budget deficit.

Creating more money could increase the demand for goods and services

but also risk causing the dolar to lose its value.

If government officials are calculating the amount of money the federal government borrows for one fiscal year, then they are

calculating a budget deficit.

A supply-side economist would be in favor of

cutting taxes

The federal budget process begins with

federal agency estimates

Contractionary policies are

fiscal policies used to increase aggregate demand, therefore increasing the growth of economic output.

Expansionary policies are

fiscal policies, like higher spending and tax cuts that encourage economic growth.

What are the primary tools of fiscal policy?

government spending and taxation

What would be the best way for the federal government to attract investors towards purchasing bonds over other investment options?

offer high interest rates

The maximum output that an economy can produce without large increases in inflation is

productive capacity.

A budget surplus occurs when

revenues exceed expenditures

A school of economics that believes tax cuts can help an economy by raising supply is

supply-side economics.

Which act created a "pay-as-you-go" system that requires Congress to raise enough revenue to cover increases in direct spending?

the 1990 Budget Enforcement Act

An increase in government spending would cause

the aggregate demand curve to shift to the right.

The loss of funds for private investment due to government borrowing is known as

the crowding-out effect

Demand-side economics is

the idea that government spending and tax cuts help an economy by raising demand.

The crowding-out effect is

the loss of funds for private investment due to government borrowing

The national debt is

the total amount of money the federal government owes to bondholders.

Assuming the federal budget is balanced, if the government increases taxes and does not change anything else, then

there should be a budget surplus.

Servicing the debt is

there should be a budget surplus.

What is the main goal of a government's fiscal policy?

to maintain a stable economy