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Short Answer
1 In the equation of the Budget Balance, what do the values represent?
(S[government] = T-G-TR)
2. What happens to the budget deficit when unemployment rates change?
As unemployment decreases…
As unemployment increases...
3. What is the cyclically adjusted budget balance, and why is it a better measure of the long
run sustainability of government policies?
Multiple Choice
1 What are the effects of Expansionary Fiscal Policies?
a. make a budget surplus smaller, or a budget deficit bigger
b. make a budget surplus bigger, and a budget deficit bigger
c. make a budget surplus bigger, or a budget deficit smaller
d. make a budget surplus smaller, and a budget deficit smaller
2. When the economy expands
a. Government tax revenue falls, some government transfers fall
b. Government tax revenue rises, some government transfers fall
c. Government tax revenue rises, some government transfers rise
d. Government tax revenue falls, some government transfers rise
True or false
Changes in government purchases of goods and services have a larger effect on real GDP than
equal size changes in taxes and government transfers.
The budget tends to move into surplus when the economy experiences a recession.
ANSWERS
short answer
1.
2.
3.
multiple choice
1.
A
2.
B
True/False
1. True
2. False