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Macroeconomics Study Set 43

Business

Quiz 13 :

B: Fiscal Policy, Deficits, Surpluses, and Debt

Quiz 13 :

B: Fiscal Policy, Deficits, Surpluses, and Debt

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The actual budget may be in deficit while the full-employment budget is in surplus.
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True False
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Answer:

True

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The actual and full-employment budgets will be equal when the economy is at full-employment.
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True False
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Answer:

True

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An increase in taxes and a decrease in government spending would be characteristic of a contractionary fiscal policy.
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True False
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Answer:

True

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If taxation becomes more progressive, the built-in stability in the economy will increase.
True False
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An increase in taxes would be an expansionary fiscal policy.
True False
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The full-employment budget measures what the Federal budget deficit or surplus would be at full employment output with existing tax and spending decisions.
True False
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The key to assessing whether fiscal policy is expansionary is to observe the change in the full-employment budget as a percentage of GDP.
True False
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A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other.
True False
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Tax revenues automatically increase during economic expansions and decrease during recessions.
True False
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The greater the progressiveness of the tax system, the less is the built-in stability of the economy.
True False
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Built-in stability refers to the fact that net tax revenues vary inversely with the level of GDP.
True False
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The operational lag of fiscal policy refers to the time which elapses between the beginning of a recession or inflation and the certain awareness that it is actually happening.
True False
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An inflationary gap can be restrained by increasing government spending and reducing taxes.
True False
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Built-in stability is synonymous with discretionary fiscal policy.
True False
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Automatic stabilizers will reduce tax revenues during recessions and increase tax revenues during periods of strong economic growth.
True False
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An increase in the cyclical deficits will automatically increase the full-employment budget deficit.
True False
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The key to assessing the direction of discretionary fiscal policy is to observe changes in the full-employment deficit.
True False
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A contractionary fiscal policy shifts the aggregate demand curve leftward and may or may not reduce real GDP.
True False
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If the MPC in the economy is .75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.
True False
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A decrease in government spending is one of the options that can be used to pursue a contractionary fiscal policy.
True False
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