Chapter 30 Reading Quiz Eco 252

Which of these is the best argument against passing a balanced budget amendment?

It would severely limit the government's ability to fight a recession.

Which of these conditions is most likely to push the government to employ a contractionary fiscal policy?

a high inflation rate

Which of these changes would have a bigger impact on state and local government budgets than on the federal budget?

an increase in the size of the public school population

Suppose there is currently no gap between the standardized employment budget deficit and the actual budget deficit. In this case, the economy is not being impacted by _____.

automatic stabilizers

Which of these policy recommendations by an economist is likely to involve the largest time lag?

cut corporate income tax rates

The use of expansionary fiscal policy during a recession is likely to result in _____.

decreased unemployment

Federal tax revenue increased from 18.1% of GDP in 1994 to 20.8% in 2000. This was largely a result of _____.

economic growth

Suppose the government wanted to address the problem of runaway inflation with discretionary fiscal policy. It would use some combination of ____________.

higher taxes and lower spending

As federal debt increases, ________ also rise, so that the deficit grows even if other government spending is held constant.

interest payments

Suppose Congress is pursuing an expansionary fiscal policy. A coordinated monetary policy would require the Fed to _____.

keep interest rates low

Between 1960 and 2000, U.S. government expenditures have represented about what portion of GDP?

one-fifth

Suppose that gifts were taxed at a rate of 10% for amounts up to $100,000 and 20% for anything over that amount. This tax would be a ________ tax.

progressive

Suppose an economy is operating close to potential GDP, and Congress cuts taxes without making an equivalent cut in spending. This will have which effect in the short run?

severe inflation

The federal government gets the LEAST amount of revenue from which of these sources?

tariffs

Politicians tend to favor expansionary fiscal policies over contractionary fiscal policies because _____.

tax cuts and spending increases are popular with voters

Which of these is an example of an automatic stabilizer?

unemployment insurance