Question 1

Which statement is the most accurate about full employment GDP?

Accepted Answer

A)  It tells us the level of output necessary to bring the unemployment level down to zero.
B)  It is the level of output that would be produced if the unemployment rate were five percent.
C)  It is the level of output that would be attained if the federal government balanced its budget.
D)  It is an ideal goal that can never be reacheD.E) A) and B)
F) None of the above

Question 2

Suppose the deficit in the year 2010 is $500 billion;in the year 2011 it falls to $200 billion.If the national debt at the beginning of year 2010 is $10 trillion,how much will it be at the end of year 2011?

Accepted Answer

A)  $10 trillion
B)  $10.2 trillion
C)  $10.5 trillion
D)  $10.7 trillion
E)  $11 trillionF) C) and D)
G) None of the above

Question 3

Without automatic stabilizers

Accepted Answer

A)  real GDP would fluctuate much more widely.
B)  real GDP would not be affected.
C)  the budget would be in balance during a time of recession.
D)  the real GDP would fluctuate less widely.E) A) and D)
F) All of the above

Question 4

President George W.Bush billed his $1.35 trillion tax cut in 2001 as both an immediate economic stimulus to fight the current recession as well as a long-term boost to economic growth.

Accepted Answer

A)  it contributed to the budget surpluses continuing through his administration.
B)  the tax cut caused no effect on the government surpluses/deficits in following years.
C)  it resulted in a rapid and expanding government deficit.
D)  it greatly improved the well being of the lower and middle income citizens.E) None of the above
F) A) and B)

Question 5

If the MPC is .6,and investment spending falls by $50 billion,GDP will fall by $____ billion.

Accepted Answer

A)  20.
B)  30.
C)  50.
D)  100.
E)  125.F) A) and B)
G) A) and D)

Question 6

We have an inflationary gap when

Accepted Answer

A)  equilibrium GDP is greater than full employment GDP.
B)  full employment GDP is greater than equilibrium GDP.
C)  equilibrium GDP is equal to full employment GDP.
D)  None of the choices are correct.E) B) and D)
F) B) and C)

Question 7

Which is the most accurate statement?

Accepted Answer

A)  If we do not balance the federal budget by early in the next century,we will go bankrupt.
B)  The United States has the highest debt to GDP ratio of all the developed nations.
C)  Our national debt leveled off between 1998 and 2000.
D)  Our national debt is owed mainly to foreigners.E) A) and B)
F) A) and C)

Question 8

Which statement is true about fiscal policy?

Accepted Answer

A)  There really is no fiscal policy,but rather a series of political compromises.
B)  Fiscal policy is legally vested in the President;congressional interference has prevented it from being effective.
C)  Although fiscal policy hasn't always been right,it is quickly formulated and put into effect.
D)  None of the statements are true of fiscal policy.E) None of the above
F) A) and C)

Question 9

The federal budget deficit went over $100 billion for the first time in

Accepted Answer

A)  1977.
B)  1979.
C)  1982.
D)  1984.
E)  1986.F) A) and C)
G) A) and B)

Question 10

When equilibrium GDP is too large,we have

Accepted Answer

A)  a recessionary gap.
B)  a depression.
C)  an inflationary gap.
D)  escalating inflation.E) All of the above
F) A) and C)

Question 11

During the Great Recession the fiscal policy measures taken to exit the recession was

Accepted Answer

A)  raise taxes and run budget deficits.
B)  raise taxes and run budget surpluses.
C)  lower taxes and run budget surpluses.
D)  lower taxes and run budget deficits.E) B) and D)
F) C) and D)

Question 12

If MPC is .5 and government spending declines by $10 billion,then GDP will fall by ______.

Accepted Answer

The answer of If MPC is .5 and government spending...

Question 13

If the MPC is .9,how much is the multiplier?

Accepted Answer

Multiplier...

Question 14

The impact lag of the economic stimulus package passed in February 2009 was exceeding long due to the fact that by the end of 2009 only ____________ had entered the economy.

Accepted Answer

The answer of The impact lag of the economic stimulus...

Question 15

Which of the following WOULD NOT be considered an automatic stabilizer for the economy?

Accepted Answer

A)  Welfare payments
B)  Unemployment compensation
C)  The progressive income tax
D)  An income tax surchargeE) C) and D)
F) None of the above

Question 16

Which is the most accurate statement?

Accepted Answer

A)  The federal government has not run a budget surplus in 40 years.
B)  The last time we ran a budget surplus was when Jimmy Carter was president.
C)  We had much larger budget deficits in the 1980s than in the 1970s.
D)  The budget deficits we have run under President Clinton are the highest we have had in our entire history.E) A) and B)
F) All of the above

Question 17

Right now our national debt is

Accepted Answer

A)  between $4 and $6 trillion.
B)  between $6 and $8 trillion.
C)  between $8 and $10 trillion.
D)  between $10 and $12 trillion.
E)  over $12 trillion.F) A) and B)
G) A) and C)

Question 18

If the multiplier is 5,the MPC is

Accepted Answer

A)  .1.
B)  .2.
C)  .5.
D)  .8.
E)  1.0.F) A) and C)
G) All of the above

Question 19

Statement I: Fiscal policy was invented by John Maynard Keynes in the 1930s.
Statement II: Until the 1980s,virtually all economists thought that the federal government should balance its budget every year.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) B) and C)
F) C) and D)

Question 20

Statement I: The federal budget deficit is about one-third the size of the national debt.
Statement II: Our federal budget deficit in 1992 was more than double the deficit in 1987.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) B) and C)
F) A) and B)

Exam 12: Fiscal Policy and the National Debt

Right now our national debt is

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Statement I: Fiscal policy was invented by John Maynard Keynes in the 1930s. Statement II: Until the 1980s,virtually all economists thought that the federal government should balance its budget every year.

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We have an inflationary gap when

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Which of the following WOULD NOT be considered an automatic stabilizer for the economy?

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When equilibrium GDP is too large,we have

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Which statement is the most accurate about full employment GDP?

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Which is the most accurate statement?

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If the MPC is .9,how much is the multiplier?

Correct AnswerverifiedMultiplier...View AnswerShow Answer

President George W.Bush billed his $1.35 trillion tax cut in 2001 as both an immediate economic stimulus to fight the current recession as well as a long-term boost to economic growth.

Correct AnswerverifiedShow Answer

If the multiplier is 5,the MPC is

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Which statement is true about fiscal policy?

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Which is the most accurate statement?

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Suppose the deficit in the year 2010 is $500 billion;in the year 2011 it falls to $200 billion.If the national debt at the beginning of year 2010 is $10 trillion,how much will it be at the end of year 2011?

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If MPC is .5 and government spending declines by $10 billion,then GDP will fall by ______.

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If the MPC is .6,and investment spending falls by $50 billion,GDP will fall by $____ billion.

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Without automatic stabilizers

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Statement I: The federal budget deficit is about one-third the size of the national debt. Statement II: Our federal budget deficit in 1992 was more than double the deficit in 1987.

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The impact lag of the economic stimulus package passed in February 2009 was exceeding long due to the fact that by the end of 2009 only ____________ had entered the economy.

Correct AnswerverifiedShow Answer

During the Great Recession the fiscal policy measures taken to exit the recession was

Correct AnswerverifiedShow Answer

The federal budget deficit went over $100 billion for the first time in

Correct AnswerverifiedShow Answer

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Multiplier...
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