Exam 5 Macro: Chapter 17

A government annually collects $230 billion in tax revenue and allocates $29 billion to its universal healthcare spending. What percentage of this government's budget is spent on healthcare? A. 12.60% B. 26.63% C. 16.43% D. 21.90%

A. 12.60%

At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012? A. $60 billion B. $0 C. $120 billion D. $180 billion

B. $0

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a: A. budget deficit. B. budget surplus. C. decrease in payroll tax. D. decrease in proportional taxes.

B. budget surplus.

Which of the following is the percentage of annual US government spending allocated to foreign aid? A. 21% B. 10% C. 1% D. 17%

C. 1%

In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about: A. 22% of the size of the U.S. GDP in 2009. B. 26% of the size of the U.S. GDP in 2009. C. 18 % of the size of the U.S. GDP in 2009. D. 10% of the size of the U.S. GDP in 2009.

C. 18 % of the size of the U.S. GDP in 2009.

When increasing oil prices cause aggregate supply to shift to the left, then: A. unemployment and inflation decrease. B. unemployment decreases and inflation increases. C. unemployment and inflation increase. D. unemployment increases and inflation decreases.

C. unemployment and inflation increase.

A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education? A. 24.50% B. 12.31% C. 30.13% D. 13.12%

D. 13.12%

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________. A. contractionary fiscal policy; lead to a budget deficit B. discretionary fiscal policy; lead to a budget surplus C. contractionary fiscal policy; lead to a budget surplus D. expansionary fiscal policy; lead to a budget deficit

D. expansionary fiscal policy; lead to a budget deficit

At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010? A. $554 billion B. $540 billion C. $0 D. $14 billion

B. $540 billion

A ______________________ means that government spending and taxes are equal. A. fiscal budget B. balanced budget C. contractionary fiscal policy D. discretionary fiscal policy

B. balanced budget

If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes? A. income tax is a proportional tax B. income tax is a progressive tax C. payroll tax is a regressive tax D. payroll tax is a progressive tax

B. income tax is a progressive tax

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? A. financial policies B. monetary policies C. fiscal policies D. economic policies

C. fiscal policies

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: A. aggregate supply curve will shift to the right. B. aggregate supply curve will shift to the left. C. aggregate demand curve will shift to the left. D. aggregate demand curve will shift to the right.

D. aggregate demand curve will shift to the right.

A government collects $70 billion quarterly in tax revenue. Each year it allocates $15 billion to the justice system and $29 billion for the administrative costs. What percentage of its total annual tax revenue is left for allocation to the remaining categories of government spending? A. 84.29% B. 15.71% C. 62.85% D. 37.15%

A. 84.29%

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life. A. an estate and gift tax; to the next generation B. a regressive tax; to non-family members C. an excise tax; to their children D. a progressive tax; to non-family members

A. an estate and gift tax; to the next generation

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy. A. an expansionary fiscal policy; an increase in government spending B. a contractionary fiscal policy; a reduction in taxes C. a contractionary fiscal policy; an increase in taxes D. an expansionary fiscal policy; an increase in corporate taxes

A. an expansionary fiscal policy; an increase in government spending

A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? A. an increase of 0.5-1.0% in the long-term interest rate B. long and variable time lags in enacting the fiscal policy C. smaller impact due to temporary fiscal policy D. output above the potential GDP output level

A. an increase of 0.5-1.0% in the long-term interest rate

If an economy moves into a recession, causing that country to produce less than potential GDP, then: A. automatic stabilizers will cause tax revenue to decrease and government spending to increase. B. automatic stabilizers will cause tax revenue to increase and government spending to decrease. C. tax revenue and government spending will be higher because of automatic stabilizers. D. tax revenue and government spending will be lower because of automatic stabilizers.

A. automatic stabilizers will cause tax revenue to decrease and government spending to increase.

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. A. budget deficit B. budget surplus C. corporate tax D. regressive tax

A. budget deficit

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting: A. discretionary fiscal policy. B. progressive fiscal policy. C. regressive fiscal policy. D. fiscal policy.

A. discretionary fiscal policy.

If a country's GDP increases, but its debt decreases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. increase or decrease B. decrease because its debt decreased C. increase because GDP increased D. decrease

A. increase or decrease

Currently, the US government accumulated debt to GDP ratio: A. is lower than its historical high point. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained relatively steady for the past decade.

A. is lower than its historical high point.

If South Dakota's governor reports a budget surplus in 2011, that state government likely: A. received more in taxes than it spent in that year. B. increased the proportional tax level. C. equalized spending and taxes in that year. D. increased the corporate income tax rate.

A. received more in taxes than it spent in that year.

When inflation begins to climb to unacceptable levels in the economy, the government should: A. use contractionary fiscal policy to shift aggregate demand to the right. B. use contractionary fiscal policy to shift aggregate demand to the left. C. use expansionary fiscal policy to shift aggregate demand to the right. D. use expansionary fiscal policy to shift aggregate demand to the left.

A. use contractionary fiscal policy to shift aggregate demand to the right.

A government collects $600 billion annually in tax revenue. Each year it allocates $35 billion to healthcare and $50 billion for education. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 21.37% B. 14.16% C. 17.51% D. 26.41%

B. 14.16%

A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending? A. 37.15% B. 28.57% C. 17.51% D. 27.58%

B. 28.57%

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes. A. expansionary B. contractionary C. discretionary D. standardized

B. contractionary

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________. A. proportional tax rate B. corporate profits C. optional tax rate D. excise profits

B. corporate profits

The current level of US government accumulated debt, when measured in nominal dollars: A. has reached higher levels in the past. B. is higher than it has ever been. C. is lower than it has ever been. D. has remained steady for the past decade.

B. is higher than it has ever been.

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional.

B. progressive.

The time lag for monetary policy is typically ________________ the time lag for fiscal policy. A. longer than B. shorter than C. about the same as D. the same as

B. shorter than

When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget. A. smaller surplus B. smaller deficit C. larger deficit D. surplus

B. smaller deficit

A government collects $700 billion annually in tax revenue. Each year it allocates $130 billion to interest payments that it must pay on its accumulated debt. What percentage of annual tax revenue is allocated to make these interest payments? A. 17.15% B. 28.75% C. 18.57% D. 27.58%

C. 18.57%

A government annually collects $230 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military? A. 27.50% B. 36.63% C. 30.43% D. 41.90%

C. 30.43%

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation. A. Standardized employment budgets B. Discretionary fiscal policies C. Automatic stabilizers D. Budget expenditures

C. Automatic stabilizers

What do goods like gasoline, tobacco, and alcohol typically share in common? A. A progressive tax is imposed on each of them. B. A regressive tax is imposed on each of them. C. They are all subject to government excise taxes. D. They are all subject to government fiscal taxes.

C. They are all subject to government excise taxes.

By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid. A. from decreases in excise tax B. from decreases in income tax C. in accumulated government debt D. from decreases in corporate tax

C. in accumulated government debt

If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease B. increase or decrease C. increase D. decrease because GDP decreased

C. increase

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. A. proportional tax B. regressive tax C. progressive tax D. excise tax

C. progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. A. progressive tax B. regressive tax C. proportional tax D. estate and gift tax

C. proportional tax

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. regressive. B. progressive. C. proportional. D. optional.

C. proportional.

If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget. A. discretionary fiscal policy B. the automatic stabilizers C. the standardized employment budget D. expansionary fiscal policy

C. the standardized employment budget

A government annually allocates $5 billion of its total tax revenue to weather related disaster relief, $21 billion to healthcare and $11 billion to education. If the government's quarterly tax revenue is $33 billion, what percentage of its budget is allocated annually to healthcare? A. 17.50% B. 63.63% C. 25.00% D. 15.90%

D. 15.90%

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be: A. an increase in payroll tax. B. an increase in excise tax. C. a budget surplus. D. a budget deficit.

D. a budget deficit.

If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then: A. government spending and tax revenue will increase because of automatic stabilizers. B. government spending and tax revenue will decrease because of automatic stabilizers. C. automatic stabilizers will increase government spending and decrease tax revenue. D. automatic stabilizers will decrease government spending and increase tax revenue.

D. automatic stabilizers will decrease government spending and increase tax revenue.

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? A. discretionary B. contractionary C. standardized D. expansionary

D. expansionary

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes. A. decrease because GDP increased B. increase because its debt increased C. increase D. increase or decrease

D. increase or decrease

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. A. optional B. proportional C. progressive D. regressive

D. regressive

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: A. optional. B. progressive. C. proportional. D. regressive.

D. regressive.