MACRO CH 13 QUIZ

3. If the cyclically-adjusted budget shows a deficit of about $100 billion and the actual budget shows a deficit of about $150 billion, it can be concluded that there is: A. Built-in stability B. A cyclical deficit C. An expansionary fiscal policy D. A contractionary fiscal policy

B

7. The amount by which government expenditures exceed revenues during a particular year is the: A. public debt. B. budget deficit. C. full-employment. D. GDP gap.

B

4. An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is .75. By how much should the government raise taxes to achieve its objective? A. $6 billion B. $9 billion C. $12 billion D. $16 billion

C

5. If the Congress passes legislation to cut taxes to counter the effects of a severe recession, then this would be an example of a: A. Political business cycle B. Contractionary fiscal policy C. Expansionary fiscal policy D. Nondiscretionary fiscal policy

C

1. When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is: A. Cyclical B. Variable C. Discretionary D. Nondiscretionary

D

2. As the economy declines, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system: A. Increases crowding out in the economy B. Decreases real interest rates in the economy C. Offsets the timing problem for fiscal policy D. Provides built-in stability for the economy

D

6. Fiscal policy refers to the: A. manipulation of government spending and taxes to stabilize domestic output, employment, and the price level. B. manipulation of government spending and taxes to achieve greater equality in the distribution of income. C. altering of the interest rate to change aggregate demand. D. fact that equal increases in government spending and taxation will be contractionary

A