Econ quiz 7

The government has a budget deficit if

its total revenues are less than its total expenditures.

The cyclically adjusted budget deficit fluctuates ______ the actual budget deficit.

less than

Expansionary fiscal policies:

make the budget surplus smaller.

The federal government's largest source of tax revenue is:

personal income and corporate profit tax

When the unemployment rate increases, the budget:

tends to move into deficit.

The federal budget tends to move toward _____ as the economy ____.

Deficit; Contracts

The multiplier effect of changes in government purchases of goods and services is equal to:

1/(1-mpc)

If the MPC is 0.9, then the government spending multiplier is:

10

If the marginal propensity to save is 0.25, and the government increases its purchases of goods and services by $100 million, then real GDP increases by:

400 Mill

Suppose that U.S. debt is $7 trillion at the beginning of the fiscal year. During the fiscal year, the government spending and government transfers are $2 trillion and tax revenues equal $1.5 trillion. At the end of the fiscal year, the debt is:

7.5 trillion

Which is NOT a method of fiscal policy?

Changes in the money supply

Suppose the economy is in a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:

Decrease taxes

The 2009 U.S. stimulus was a(n) _________ fiscal policy that ________ aggregate demand.

Expansionary; increased

In the basic equation of national income accounting, the government directly controls _____ and influences ______.

G;C and I

When the budget is in deficit, the government generally:

Increases the public debt

A $100 million increase in government spending increases equilibrium GDP by:

More than 100 mill

All are sources of federal tax revenue EXCEPT:

Sales taxes

Government payments to households for which no good or service is provided in return are called:

Transfer payments

What can the federal government do to finance a deficit?

borrow funds

Changes in the budget balance

can be both the result of and the cause of changes in the economy.