ECON Final

An example of discretionary fiscal policy would be

a tax cut adopted to stimulate consumption.

Using current services budgeting

an increase in spending is spending greater than that needed to provide an unchanged level of services.

Many economists look at the Federal Budget and see that it should be broken into

an operating budget and a capital budget

The argument that a Balanced Budget Amendment would be "pro-cyclical" means that it would cause

bad times to be worse than they would otherwise be.

The Federal Funds Rate is the rate at which

banks lend to one another to meet reserve requirements.

Nondiscretionary Fiscal Policy works by having

both progressive income tax rates take a portion of increased income and welfare programs reduce spending on people when they have increased incomes thereby dampening periods of economic growth.

Suppose an economist is analyzing the impact of a debt and its ability to be paid. That economist will focus on

both the ratio of the debt to GDP and the interest payments as a percentage of GDP

Suppose an economist is analyzing the impact of a budget deficit used to finance a significant infrastructure project that will pay significant dividends in the coming years. That economist will focus on

both the ratio of the deficit to GDP and whether what is purchased with the borrowed money will produce enough gains to be worth that borrowed.

If balanced budget amendment to the U.S. Constitution were passed, during economic prosperity, such an amendment would

cause those good times to be even better

The large budget deficits of 2003 and 2006 meant that the federal government was borrowing upwards of $1.7 trillion over this four-year period. If that borrowing limits the ability of the private sector to get financial capital for its purposes economists would call this

crowding out.

M1 includes

currency plus checkable accounts and traveler's checks.

A purchase of government debt as part of open market operations would be an example of

expansionary monetary policy.

The transmission mechanism in monetary policy is the

manner in which a buying or selling of bonds ultimately impacts important macroeconomic variables such as real GDP.

In advancing Congress and the President on how much to increase defense spending in response to security concerns, economists would suggest that they evaluate the

marginal cost of each additional dollar spent on defense versus its marginal benefit

The Federal Reserve governs U.S.

monetary policy.

If you were to use an Aggregate Supply Aggregate Demand diagram to model nondiscretionary and discretionary fiscal policy in reaction to a negative aggregate demand shock, you would see the aggregate demand curve move

to the left, back toward its pre-shock position as a result of these policies

If you were to use an Aggregate Supply Aggregate Demand diagram to model nondiscretionary and discretionary fiscal policy in reaction to a positive aggregate demand shock, you would see the aggregate demand curve move

to the right, back toward its pre-shock position as a result of these policies.

Following the financial collapse in late 2008, the deficit increased in part because of the

weakened state of the economy caused tax revenues to slow.

Open Market Operations refer to the buying and selling of

government securities.

Fiscal policy is purposeful movements in ____________ designed to direct an economy.

government spending and taxes

If monetary policy is unchanged, the outstanding national debt will increase whenever

government spending exceeds government tax receipts.

An increasing portion of the U.S. national debt is held by

government trust funds

The Federal Reserve, the Bank of England, the European Central Bank, and the Bank of Japan are largely

Independent of political influence

The fiscal year for the Federal government begins

October 1.

Through the taking of deposits and making loans banks

create more money that physically exists.

The point of Open Market Operations is to

increase or decrease the money supply so as to influence interest rates.

Generational accounting refers to the

net tax rate of each generation given the taxes they will pay and the benefits they will receive.

Most economists would place the costs of a new public transit system in the

capital budget

An increase in the discount rate would be an example of

contractionary monetary policy.

The United States Constitution states that

a law must be passed to approve spending for a government activity.

M2 includes

currency plus checkable accounts plus traveler's checks plus small CDs and money market accounts.

The Federal Funds rate is

determined by market forces but targeted by the Federal Reserve.

The portion of the Obama stimulus package that cut taxes is best thought of as

discretionary (and expansionary) fiscal policy.

A political problem with discretionary fiscal policy is the

expansionary bias.

A reduction of the reserve ratio would be an example of

expansionary monetary policy.

The Federal Reserve has

indirect influence over macroeconomic variables such as unemployment and inflation through the use of intermediate targets.

When the transmission mechanism breaks down macroeconomists call this the

liquidity trap.

If the Fed wants banks to have more money to lend, it can

lower the reserve ratio.

If logrolling occurs during the creation of a highway construction bill, this means that

members of congress are agreeing to support someones else's highway so that other members will support their own projects.

A monetary aggregate is

a measure of the quantity of money in the economy

Which of the following programs is off-budget?

social security

Functional finance is that part of the deficit that is attributable to

spending programs or tax cuts passed to stimulate an economy in recession.

which of the following programs is on-budget

student loans

The Federal Reserve came into existence in response to

the boom and bust nature of the late 19th and early 20th century

When analyzing the impact of a budget deficit, an economist will focus on

the ratio of the deficit to GDP and whether what is purchased with the borrowed money can be considered an investment.

The national debt is the

total amount owed by the federal government.

Programs such as Social Security and Medicare

do not require re-authorization

Fiscal Policy is controlled by

Congress and the President.

Which of the following would be described as the administrative lag?

The time required to agree upon a policy remedy for a recession.

Which of the following would be described as the operational lag?

The time required to get a particular plan implemented with the money getting into peoples' hands.

Which of the following would be described as the recognition lag?

The time required to know that there is a recession.

Contractionary monetary policy would shift the

aggregate demand curve to the left.

Expansionary monetary policy would shift the

aggregate demand curve to the right.

Short-run expansionary Fiscal Policy would result in

aggregate demand moving to the right.

The opportunity cost of rebuilding the Gulf Coast after hurricane Katrina and Rita could be the

all of the options are correct

The Federal Reserve's long standing tools include

all of these options are correct.

A budget deficit is the

amount by which expenditures exceed revenues

A budget surplus is the

amount by which revenues exceed expenditures.

Using baseline budgeting,

an increase in spending is spending greater than last year's spending

The portion of the Obama stimulus package that bolstered state Medicaid plans is best thought of as

nondiscretionary fiscal policy.

Most economists would place the costs of food for soldiers in the

operating budget

Crowding out is an example of

opportunity cost.

When the Federal Reserve loans money to banks, the rate it charges banks with excellent credit is the

primary credit rate.

A Balanced Budget Amendment would be

procyclical.

A peace dividend

results from the reduction in defense spending as a war is concluded.

If the Federal Reserve wished to increase interest rates using open market operations it would

sell US government securities.

A continuing resolution allows

spending to continue as it has been for a specified period of time.

Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that

the former requires timely decisions whereas the latter is built into the system.

An example of nondiscretionary fiscal policy would be

the operation of the welfare state.

The reserve ratio is

the percentage of every dollar deposited in a checking account that a bank must maintain in reserves.

The Federal Reserve expanded their traditional tools set in the 2007-2009 recession to include

the purchase of long term Treasuries.

Spending on programs for which there is an existing legal obligation is labeled

mandatory.