Chapter 17
Which of the following is the percentage of annual US government spending allocated to foreign aid?
1%
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?
15.90%
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?
30.43%
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?
84.29%
_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
Automatic stabilizers
What do goods like gasoline, tobacco, and alcohol typically share in common?
They are all subject to government excise taxes.
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 budget deficit.
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
aggregate demand curve will shift to the right.
The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.
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?
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:
automatic stabilizers will cause tax revenue to decrease and government spending to increase.
If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then:
automatic stabilizers will decrease government spending and increase tax revenue.
A ______________________ means that government spending and taxes are equal.
balanced budget
A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.
budget deficit
A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.
contractionary
In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.
corporate profits
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:
discretionary fiscal policy.
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 ____________________________.
expansionary fiscal policy; lead to a budget deficit
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?
fiscal policies
By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid.
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.
increase
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
increase or decrease
The current level of US government accumulated debt, when measured in nominal dollars:
is higher than it has ever been.
A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.
progressive tax
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:
progressive.
A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.
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:
proportional.
If South Dakota's governor reports a budget surplus in 2011, that state government likely:
received more in taxes than it spent in that year.
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:
regressive
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 ___________________
regressive
The time lag for monetary policy is typically ________________ the time lag for fiscal policy
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.
smaller deficit
When increasing oil prices cause aggregate supply to shift to the left, then:
unemployment and inflation increase.
When inflation begins to climb to unacceptable levels in the economy, the government should:
use contractionary fiscal policy to shift aggregate demand to the right.
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:
budget surplus