Quiz 10 - Chapter 10: Fiscal Policy and Debt

why are persistent budget deficits worrisome?

all of the above

government debt in the United States can be categorized a number of different ways. for each debt definition, please indicate all of the scenarios which match that type of debt. the national debt includes Treasury bonds bought by

✔️ the government of china ✔️ the social security administration ✔️ a little old lady in peoria ✔️ a citizen of germany ✔️ first national bank of dallas

lilliput is a country that has closed borders and does not import or export any goods or services; hence, they do not worry about trade with other countries. total spending for the federal government of Lilliput for the last fiscal year was $4.71$⁢4.71 billion. the country collected $4.83$⁢4.83 billion in taxes during this same fiscal year. assume government transfers were zero. a) Based on this information, what is lilliput's budget balance? b) in the last fiscal year, Lilliput was running

a) 0.12 b) a budget surplus

a) what is the eventual effect on real GDP if the government increases its purchases of goods and services by $50,000? assume the marginal propensity to consume (MPC) is 0.75. b) what is the eventual effect on real GDP if the government, instead of changing its spending, increases transfers by $50,000? assume the MPC has not changed. c) an increase in government transfers or taxes, as opposed to an increase in government purchases of goods and services, will result in

a) 200,000 b) 150,000 c) a smaller eventual effect on real GDP

for the two questions, please use the given Laffer curve. a) in the 1980s, arthur laffer proposed that the economy was operating around which point? b) given the answer to the first question, what discretionary fiscal policy tool did arthur laffer propose that the united states utilize to increase tax revenues?

a) C b) decrease income tax rates

classify the actions as either discretionary spending or an automatic stabilizer. a) economic growth increases personal and corporate income, increasing tax payments. b) a bill is passed to increase unemployment benefit payments. c) government spending on welfare increases due to an increase in applicants. d) congress votes to cut government spending in order to balance the budget. e) a law is enacted that increases medicare coverage. f) the government cuts taxes to stimulate consumer spending. g) the government increases tax rates to prevent inflation. h) tax revenue falls as a result of a recession reducing personal income and corporate profits. i) an increased number of layoffs increases government spending on unemployment benefits.

a) automatic stabilizer b) discretionary spending c) automatic stabilizer d) discretionary spending e) discretionary spending f) discretionary spending g) discretionary spending h) automatic stabilizer i) automatic stabilizer

a) reducing tax rates is which type of fiscal policy? b) which type of fiscal policy takes longer to affect the economy: demand‑side or supply‑side?

a) both demand‑side and supply‑side b) supply‑side

the multiplier effect occurs when an initial increase (or decrease) in autonomous expenditure produces a greater increase (or decrease) in real GDP than the initial change. a) in which type of discretionary fiscal policy does the multiplier play a role? assume a marginal propensity to consume (MPC) of 0.5. b) which discretionary fiscal policy would have a more pronounced impact on the economy?

a) both government spending changes and tax changes b) a 200 billion dollar increase in government spending would have a more pronounced impact on the economy.

select the term that matches each definition. a) when the government receives more in taxes than it spends in a given time period b) when government spending and taxes are equal c) when the federal government spends more than it collects in taxes in a given time period d) the total accumulated amount that the government has borrowed and not yet paid back over time

a) budget surplus b) balanced budget c) budget deficit d) government debt

complete each statement by selecting tterm-4he appropriate type of fiscal policy. a) lowering inflation and increasing unemployment is a goal of ___ fiscal policy b) lowering unemployment and prices is a goal of ___ fiscal policy c) lowering unemployment and increasing inflation is a goal of ___ fiscal policy d) ___ fiscal policy focuses on reducing regulations on businesses. e) ___ fiscal policy involves more government spending money on anything. f) ___ fiscal policy encourages human and capital development.

a) contractionary b) expansionary c) expansionary d) supply-side e) expansionary f) supply-side

a) if the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? b) what is a likely consequence of this policy?

a) cut spending equal to the reduction in tax revenue b) the negative consequences of the recession are magnified.

select the best term to describe different approaches to federal finance. a) policymakers should reduce spending and increase taxes when the economy is growing in order to prevent "overheating." b) this approach was considered conventional wisdom until the advent of the Great Depression. c) policymakers should focus on keeping unemployment low and providing the people with the public goods and services they want. d) if insisted upon, this approach would only worsen the economy during a recession. e) this approach ignores the impact of the budget on the business cycle.

a) cyclically balanced budget b) annually balanced budget c) functional finance d) annually balanced budget e) functional finance

over the past year, ionia's money supply increased by $6 billion, $4 billion in bonds were sold to the public, an unused military base was sold for $3 billion, and the government spent $20 billion. a) ionia had a budget determine the amount of Ionia's budget deficit or surplus. b) $ ___ billion determine the amount of Ionia's tax revenue for the year. c) $ ___ billion

a) deficit b) -19 c) 7

a) for the u.s. government, which of the given is NOT an example of discretionary spending? b) for the u.s. government, which of the given is NOT an example of mandatory spending? c) which type of spending currently takes up a larger proportion of the u.s. federal budget?

a) medicare b) education spending c) mandatory spending

identify each scenario as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. a) an increase in the money supply b) a decrease in taxes c) a decrease in the unemployment rate d) an increase in rax rates e) a decrease in government spending f) a decrease in the money supply g) a decrease in transfer payments h) an increase in corporate bonds purchased i) an increase in government spending

a) not an example of b) an expansionary c) not an example of d) a contractionary e) a contractionary f) not an example of g) a contractionary h) not an example of i) an expansionary

which describes the role of automatic stabilizers in the economy?

automatic stabilizers have a similar impact as discretionary fiscal policy but occur automatically, without action by the government. automatic stabilizers increase aggregate demand during recessions and reduce aggregate demand during expansions.

the nation of cantania regularly experiences changes in its national budget situation. in some years, cantania operates with a budget deficit, while in other years it experiences a budget surplus. please classify each of the possible consequences into the appropriate category of the budget circumstance most likely to cause them.

cantania experiences an increase in budget surplus: - the government of cantania stops borrowing from foreign nations - more funds are made available for private investment in physical capital cantania experiences an increase in budget deficit: - interest rates in cantania rise cantania's government increases its demand for financial capital

place the fiscal policy timing lags in order from earliest to latest. not all lags will be used.

earliest lag - information - recognition - decision - implementation latest lag

which of the situations is an example of the crowding-out effect on investment as it pertains to macroeconomics?

jack wants to borrow money to create a cowboy-themed inflatable bounce house for kids called "wild wild west." however, the government is running a deficit which has increased interest rates so much that jack can no longer afford to borrow the money.

the public choice perspective on deficit spending suggests that deficit spending

shifts the costs of programs away from current taxpayers and onto future generations.

one of the key underpinnings of public choice analysis is the assumption that politicians and bureaucrats

make political decisions based on self‑interest, just as individuals and firms do.

which statement best describes some of the components of externally held debt?

public debt held by foreign individuals and entities.

government debt in the United States can be categorized a number of different ways. for each debt definition, please indicate all of the scenarios which match that type of debt. internally held debt includes bonds owned by

✔️ a little old lady in peoria ✔️ first national bank of dallas

government debt in the United States can be categorized a number of different ways. for each debt definition, please indicate all of the scenarios which match that type of debt. externally held debt includes bonds owned by

✔️ the government of china ✔️ a citizen of germany

government debt in the United States can be categorized in a number of different ways. for each debt definition, please indicate all of the scenarios which match that type of debt. the public debt includes Treasury bonds bought by

✔️ the government of china ✔️ a little old lady in peoria ✔️ a citizen of germany ✔️ first national bank of dallas