ECON 002 FINAL CH 11-12

Other things equal, an increase in defense spending will increase the budget deficit. T/F

True

A discretionary fiscal policy is a policy that: A) Is an intentional change in taxation or government spending. B) Applies to some industries but not others. C) Applies to some states but not others. D) Works automatically without public announcement or plan. E) Is developed in secret.

A) Is an intentional change in taxation or government spending.

An increase in federal budget deficit: A) May create inflation. B) Only occurs when there is a surplus in the balance of trade. C) Decreases aggregate quantity demanded along a stationary curve. D) Decreases aggregate supply. E) May reduce the equilibrium level of output and employment

A) May create inflation

Which of the following is not a tool of fiscal policy? A) Money Supply B) Government purchases C) Social Security program D) Unemployment benefits E) Taxes

A) Money Supply

Increased government borrowing to cover a budget deficit causes: A) A lower interest rate and depreciation of the U.S. dollar. B) A higher interest rate and appreciation of the U.S. dollar. C) A lower interest rate and appreciation of the U.S. dollar. D) A higher interest rate and depreciation of the U.S. dollar. E) No change in the interest rate and depreciation of the U.S. dollar.

B) A higher interest rate and appreciation of the U.S. dollar

The U.S government's fiscal year comes from: A) September of one year through August of the next year. B) October of one year through September of the next year. C) January through December. D) April of one year through March of the next year. E) June of one year through May of the next year.

B) October of one year through September of the next year.

The most recent recession in the United States began in: A) 2005 B) 2010 C) 2007 D) 2003 E) 2001

C) 2007

The Federal Government budget is: A) Equal to government receipts minus government expenditures. B) Always in balance: Receipts must equal expenditures. C) Usually planned for the calendar year: January through December. D) A plan for government expenditures and revenues for the coming year. E) A year-end record of how much the government received in income and how much it spent.

D) A plan for government expenditures and revenues for the coming year.

The National Debt is: A) A flow variable measuring the net accumulation of past deficits. B) A stock variable showing the amount by which the government's spending is greater than its revenues in a given year. C) A flow variable showing the amount by which the government's spending is greater than its revenues in a given year. D) A stock variable measuring the accumulation of past deficits. E) None.

D) A stock variable measuring the accumulation of past deficits.

The largest category of federal government expenditure is: A) Interest on the federal debt. B) Capital expenditures. C) Grants to states and localities. D) Direct benefit payments to individuals. E) National defense.

D) Direct benefit payments to individuals.

Fiscal Policy is concerned with: A) Money only B) Money and taxation only C) Government spending, taxation, and money. D) Government spending and taxation only. E) Government spending and money only.

D) Government spending and taxation only.

The natural rate of unemployment is: A) Seasonal unemployment only B) The unemployment rate when none of the work force is unemployed longer than six weeks C) 3% D) The unemployment rate at which the economy is producing its potential GDP. E) Defined by the government.

D) The unemployment rate at which the economy is producing its potential GDP.

After the Great Depression, the role of fiscal policy in the U.S. economy was changed as a result of: A) The influence of Keynes' General Theory B) The Employment Act of 1946 C) The economic impact of World War II D) Both A & C E) All in of them

E) All in of them

In Keynes' philosophy of government budgets, A) Surpluses are appropriate during recessions B) Permanent surpluses are desirable C) Permanent deficits are desirable D) The goal is to have a budget surplus E) Deficits are appropriate during recessions

E) Deficits are appropriate during recessions

Government purchases of goods and services are not included in the government budget deficit but are included in the government purchases component of GDP. T/F

False

In order for the government to increase spending, it must increase taxes to finance that spending. T/F

False

Most government purchases are made at the federal, not the state, level of government. T/F

False

The U.S. federal budget is determined exclusively by Congress. T/F

False

"Net Taxes" equals "taxes minus transfer payments True/False

True

Discretionary fiscal policy works by shifting the aggregate demand curve. T/F

True