Download Fiscal Policy Quiz

Fiscal Policy Quiz
Economics Honors
1. Fiscal policy refers to
a. the use of government spending
and taxation to influence the level
of economic growth and inflation.
b. the adjustment of the GDP for
inflation.
c. the purchase and sale of U.S.
government securities to regulate
the money supply.
d. a policy action by Congress to
overrule unpopular budget cuts by
the president.
e. the use of fines to penalize unfair
business practices.
2. Income taxes affect aggregate demand
a. indirectly by changing investment
spending.
b. indirectly by changing
consumption.
c. indirectly by changing net exports.
d. directly through government
spending.
e. directly by changing disposable
income.
3. Fiscal policy affects which two
components of aggregate demand
either directly or indirectly?
a. Consumption and investment
b. Taxes and consumption
c. Government spending and
consumption
d. Net exports and saving
e. Investment and net exports
4. If the federal government of the United
States decides to cut its spending by
200 million dollars, all else equal, what
would happen to aggregate
expenditures (AE)?
a.
b.
c.
d.
e.
AE would remain constant.
AE would equal potential real GDP.
AE would increase.
AE would decrease.
We cannot know what would
happen to AE with the information
given.
5. Which of the following is not a means
to finance government spending?
a.
b.
c.
d.
e.
Personal income taxes
Government subsidies
Money creation
Government debt
Capital gains taxes
6. Fiscal policy in the United States is the
result of
a. a yearly budget process involving
both the president and Congress.
b. a five-year budget plan overseen by
the Office of Management and
Budget.
c. a joint budget resolution by federal
agencies.
d. an act of Congress.
e. a decree by the president.
7. Economists define two components of
fiscal policy. These are:
a. Discretionary fiscal policy and
automatic stabilizers.
b. Discretionary fiscal policy and
reflexive fiscal policy.
c. Obligatory and reflexive fiscal
policies.
d. Obligatory fiscal policy and
automatic fiscal actions.
e. Automatic stabilizers and reflexive
fiscal policy.
8. An automatic stabilizer is
a. a change in government spending
aimed at achieving a policy goal.
b. a deliberate change in taxation
aimed at increasing real GDP.
c. an element of monetary policy that
automatically changes in value as
real GDP changes.
d. an element of fiscal policy that
automatically changes in value as
real GDP changes.
e. a decrease in tax rates as the
economy moves into a recession.
9. Starting with a situation where there is
a substantial budget deficit, when tax
revenues grow faster than federal
expenditures, the government will
experience
a.
b.
c.
d.
e.
an increasing national debt.
a balanced budget.
an increasing budget deficit.
a declining budget deficit.
a declining budget surplus.
10. Which of the following is not related to
fiscal policy?
a.
b.
c.
d.
Welfare
Increasing taxes
Balancing the budget deficit
Foreign exchange market
intervention
e. All of these
11. Discretionary fiscal policy is best
defined as
a. the deliberate change in tax laws
and government spending to
change equilibrium income.
b. the automatic change in certain
fiscal instruments when real GDP
changes.
c. the deliberate manipulation of the
money supply to expand the
economy.
d. the policy action taken by Congress
to reduce the federal budget
deficit.
e. the arbitrary fluctuation in tax laws
and budget requirements.
12. Budget deficits tend to grow during
recessions because
a. real GDP growth is negative, which
reduces tax receipts in relation to
government expenditures.
b. real GDP growth is positive, which
reduces both tax receipts and
transfer payments.
c. real GDP growth is negative, which
reduces transfer payments in
relation to tax receipts.
d. real GDP growth is zero, which
causes neither tax receipts nor
government expenditures to grow.
e. real GDP growth is positive, which
increases tax receipts in relation to
government expenditures.
13. Crowding out takes place when the
government budget deficit
a.
b.
c.
d.
e.
reduces domestic investment.
increases transfer payments.
increases tax rates.
reduces saving.
increases net exports.
14. The national debt is
a. the current budget deficit plus the
interest outstanding.
b. the stock of government bonds
outstanding.
c. smaller than the current budget
deficit.
d. a product of the government
spending less than the taxes it
collects.
e. the current budget deficit.
15. All the following are potential costs of
the U.S. national debt except
a. higher interest rates that
discourage private investment.
b. lower inflation in the future.
c. foreign-held debt that must be
repaid.
d. reduced domestic wealth in the
future.
e. a higher international trade deficit.
16. The growth of the federal budget deficit
is linked to all the following except
a.
b.
c.
d.
e.
the GDP gap.
international trade patterns.
the size of the national debt.
the unemployment rate.
the business cycle.
17. We would expect the U.S. federal
government to receive most of its tax
revenue from
a.
b.
c.
d.
e.
tariffs on foreign imports.
state income taxes.
federal income taxes.
sales taxes.
value-added taxes.
18. When governments issue debt to
finance their spending, households and
firms expect higher future tax rates that
will be necessary to pay for the newly
adopted debt, and therefore consume
and invest less in the present, and so
this effect will limit the increase in
aggregate expenditures.
a. T
b. F
19. The government policy that emphasizes
tax rate cuts to create incentives for
firms to produce more and hire more
workers came to be known as
a.
b.
c.
d.
e.
demand-side economics.
Laffer establishment.
Laffer curve politics.
supply-side economics.
aggregate supply chain.
20. If crowding out exists, the expansionary
effect of government spending will be
a.
b.
c.
d.
e.
smaller than intended.
larger than intended.
negative.
infinite.
unchanged.
Reference: [23.2.7]
[1] [A]
Reference: [23.2.8]
[2] [B]
Reference: [23.2.9]
[3] [C]
Reference: [23.2.12]
[4] [D]
Reference: [23.2.27]
[5] [B]
Reference: [23.3.68]
[6] [A]
Reference: [23.3.74]
[7] [A]
Reference: [23.3.75]
[8] [D]
Reference: [23.3.76]
[9] [D]
Reference: [23.3.77]
[10] [D]
Reference: [23.3.78]
[11] [A]
Reference: [23.3.81]
[12] [A]
Reference: [23.3.91]
[13] [A]
Reference: [23.3.96]
[14] [B]
Reference: [23.3.99]
[15] [B]
Reference: [23.3.100]
[16] [B]
Reference: [23.4.132]
[17] [C]
Reference: [23.2.51]
[18] [A]
Reference: [23.2.54]
[19] [D]
Reference: [23.2.58]
[20] [A]