Question 1

When the FOMC raises the federal funds rate, almost immediately ________ and a few weeks later the ________.

Accepted Answer

A)  short-term interest rates rise; quantity of money and supply of loanable funds decrease
B)  long-term interest rates rise; quantity of money and supply of loanable funds decrease
C)  short-term interest rates fall; quantity of money and supply of loanable funds decrease
D)  long-term interest rates rise; quantity of money and supply of loanable funds increase
E)  short-term interest rates fall; quantity of money and supply of loanable funds increase

Question 2

"As the saying goes, the only sure things in life are death and taxes. This saying points out the result that everything having to do with taxes is an automatic fiscal policy." Is the preceding analysis correct or incorrect?
 Explain your answer.

Accepted Answer

The analysis is incorrect because whenev...

Question 3

If government expenditure increases by $200 billion and taxes simultaneously increase by $200 billion, then aggregate demand

Accepted Answer

A)  remains the same.
B)  decreases no matter what happens to aggregate supply.
C)  increases no matter what happens to aggregate supply.
D)  increases only if aggregate supply increases.
E)  increases only if aggregate supply decreases.

Question 4

What are automatic stabilizers?
 How do they help stabilize real GDP?

Accepted Answer

Automatic stabilizers are features of fi...

Question 5

Government  outlays  (trillions of  Tax revenue  (trillions of  Year  2005 dollars)   2005 dollars)  20080.750.8020090.800.8320100.870.8620110.950.9520121.061.02\begin{array} { c c c } & \begin{array} { c } 	ext { Government } \	ext { outlays } \	ext { (trillions of }\end{array} & \begin{array} { c } 	ext { Tax revenue } \	ext { (trillions of }\end{array} \	ext { Year } & 	ext { 2005 dollars)  } & 	ext { 2005 dollars)  } \2008 & 0.75 & 0.80 \2009 & 0.80 & 0.83 \2010 & 0.87 & 0.86 \2011 & 0.95 & 0.95 \2012 & 1.06 & 1.02 \\hline\end{array} Year 20082009201020112012​ Government  outlays  (trillions of ​ 2005 dollars)  0.750.800.870.951.06​ Tax revenue  (trillions of ​ 2005 dollars)  0.800.830.860.951.02​​  
The table above gives a nation's government outlays and tax revenue for 2008 through 2012.
-During which years did the country have a budget deficit?

Accepted Answer

A)  2008 and 2009
B)  2012 only
C)  2011 only
D)  2010 and 2012
E)  all except 2011

Question 6

Automatic stabilizers are defined as

Accepted Answer

A)  actions taken by the President without Congressional consent to stabilize the economy.
B)  actions taken by an act of Congress to stabilize the economy.
C)  policy that stabilizes without the need for action by the government.
D)  discretionary policy taken to stabilize the economy.
E)  policy that has no multiplier effects.

Question 7

If the Fed raises the federal funds rate, which of the following happens?

Accepted Answer

A)  Net exports increase.
B)  The real interest rate falls.
C)  Aggregate demand decreases.
D)  Real GDP increases.
E)  The price level rises.

Question 8

How does a rise in the federal funds rate affect aggregate demand, real GDP, and the price level?

Accepted Answer

A rise in the federal funds leads to inv...

Question 9

Government expenditure ________ change potential GDP and taxes ________ change potential GDP.

Accepted Answer

A)  can; can
B)  cannot; can
C)  can; cannot
D)  cannot; cannot
E)  None of the above answers is correct.

Question 10

Control of monetary policy rests with

Accepted Answer

A)  Congress.
B)  the President.
C)  the Federal Reserve.
D)  the Comptroller of the Currency.
E)  the U.S. Treasury.

Question 11

The Fed affects aggregate demand through monetary policy by changing

Accepted Answer

A)  tax rates on only interest income and so influencing disposable income.
B)  government expenditure and so influencing the budget balance.
C)  the quantity of reserves and determining government expenditure.
D)  tax rates and influencing disposable income.
E)  the federal funds rate and the quantity of reserves.

Question 12

During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?

Accepted Answer

A)  increase government expenditure, decrease taxes, increase the quantity of money
B)  increase government expenditure, decrease taxes, decrease the quantity of money
C)  decrease government expenditure, increase taxes, decrease the quantity of money
D)  do not change government expenditures or taxes , increase the quantity of money
E)  decrease government expenditures, increase taxes, do not change the quantity of money

Question 13

The FOMC is the

Accepted Answer

A)  report the Fed gives to Congress twice a year.
B)  report that summarizes the economy across Fed districts.
C)  group within the Fed that makes monetary policy decisions.
D)  name of the meeting that the Fed has with Congress twice a year.
E)  interest rate the Fed most directly influences.

Question 14

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect?
 Define the balanced budget multiplier and then explain your answer.

Accepted Answer

The statement is incorrect because, even...

Question 15

Automatic stabilizers

Accepted Answer

A)  increase the magnitude of the government expenditure multiplier.
B)  decrease the magnitude of the government expenditure multiplier.
C)  have no effect on the magnitude of the government expenditure multiplier.
D)  reduce the government expenditure multiplier to zero.
E)  increase the magnitude of the tax multiplier.

Question 16

If the government increases expenditure by $40 billion and increases tax revenue by $40 billion, what is the impact on aggregate demand?
 Explain your answer.

Accepted Answer

Aggregate demand increases. The governme...

Question 17

If government expenditure on goods and services increase by $100 billion, then aggregate demand

Accepted Answer

A)  increases by $100 billion.
B)  increases by less than $100 billion.
C)  increases by more than $100 billion.
D)  remains unchanged.
E)  decreases by more than $100 billion.

Question 18

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion. Does the country have a budget surplus or deficit and what is the surplus or deficit?

Accepted Answer

The country has a bu...

Question 19

The supply-side effects show that a tax cut on labor income ________ employment and ________ potential GDP.

Accepted Answer

A)  increases; increases
B)  increases; does not change
C)  increases; decreases
D)  decreases; increases
E)  decreases; decreases

Question 20

As the Fed lowers the federal funds rate,

Accepted Answer

A)  aggregate demand increases.
B)  real GDP decreases.
C)  the price level falls.
D)  aggregate income decreases.
E)  aggregate supply increases.

Exam 20: Fiscal Policy and Monetary Policy

The Fed affects aggregate demand through monetary policy by changing

Correct Answer
verified

During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?

Correct Answer
verified

The supply-side effects show that a tax cut on labor income employment and potential GDP.

Correct Answer
verified

"As the saying goes, the only sure things in life are death and taxes. This saying points out the result that everything having to do with taxes is an automatic fiscal policy." Is the preceding analysis correct or incorrect? Explain your answer.

Correct Answer
verified
The analysis is incorrect because whenev...
View Answer

Automatic stabilizers

Correct Answer
verified

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion. Does the country have a budget surplus or deficit and what is the surplus or deficit?

Correct Answer
verified
The country has a bu...
View Answer

Control of monetary policy rests with

Correct Answer
verified

If the government increases expenditure by $40 billion and increases tax revenue by $40 billion, what is the impact on aggregate demand? Explain your answer.

Correct Answer
verified
Aggregate demand increases. The governme...
View Answer

What are automatic stabilizers? How do they help stabilize real GDP?

Correct Answer
verified
Automatic stabilizers are features of fi...
View Answer

Correct Answer
verified

If government expenditure on goods and services increase by $100 billion, then aggregate demand

Correct Answer
verified

When the FOMC raises the federal funds rate, almost immediately and a few weeks later the .

Correct Answer
verified

The FOMC is the

Correct Answer
verified

As the Fed lowers the federal funds rate,

Correct Answer
verified

If government expenditure increases by $200 billion and taxes simultaneously increase by $200 billion, then aggregate demand

Correct Answer
verified

Government expenditure change potential GDP and taxes change potential GDP.

Correct Answer
verified

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect? Define the balanced budget multiplier and then explain your answer.

Correct Answer
verified
The statement is incorrect because, even...
View Answer

Automatic stabilizers are defined as

Correct Answer
verified

How does a rise in the federal funds rate affect aggregate demand, real GDP, and the price level?

Correct Answer
verified
A rise in the federal funds leads to inv...
View Answer

If the Fed raises the federal funds rate, which of the following happens?

Correct Answer
verified

Exam 20: Fiscal Policy and Monetary Policy

The Fed affects aggregate demand through monetary policy by changing

Correct AnswerverifiedShow Answer

During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?

Correct AnswerverifiedShow Answer

The supply-side effects show that a tax cut on labor income ________ employment and ________ potential GDP.

Correct AnswerverifiedShow Answer

"As the saying goes, the only sure things in life are death and taxes. This saying points out the result that everything having to do with taxes is an automatic fiscal policy." Is the preceding analysis correct or incorrect? Explain your answer.

Correct AnswerverifiedThe analysis is incorrect because whenev...View AnswerShow Answer

Automatic stabilizers

Correct AnswerverifiedShow Answer

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion. Does the country have a budget surplus or deficit and what is the surplus or deficit?

Correct AnswerverifiedThe country has a bu...View AnswerShow Answer

Control of monetary policy rests with

Correct AnswerverifiedShow Answer

If the government increases expenditure by $40 billion and increases tax revenue by $40 billion, what is the impact on aggregate demand? Explain your answer.

Correct AnswerverifiedAggregate demand increases. The governme...View AnswerShow Answer

What are automatic stabilizers? How do they help stabilize real GDP?

Correct AnswerverifiedAutomatic stabilizers are features of fi...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If government expenditure on goods and services increase by $100 billion, then aggregate demand

Correct AnswerverifiedShow Answer

When the FOMC raises the federal funds rate, almost immediately ________ and a few weeks later the ________.

Correct AnswerverifiedShow Answer

The FOMC is the

Correct AnswerverifiedShow Answer

As the Fed lowers the federal funds rate,

Correct AnswerverifiedShow Answer

If government expenditure increases by $200 billion and taxes simultaneously increase by $200 billion, then aggregate demand

Correct AnswerverifiedShow Answer

Government expenditure ________ change potential GDP and taxes ________ change potential GDP.

Correct AnswerverifiedShow Answer

"As long as supply-side effects are ignored, the balanced budget multiplier is equal to zero." Is the previous statement correct or incorrect? Define the balanced budget multiplier and then explain your answer.

Correct AnswerverifiedThe statement is incorrect because, even...View AnswerShow Answer

Automatic stabilizers are defined as

Correct AnswerverifiedShow Answer

How does a rise in the federal funds rate affect aggregate demand, real GDP, and the price level?

Correct AnswerverifiedA rise in the federal funds leads to inv...View AnswerShow Answer

If the Fed raises the federal funds rate, which of the following happens?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

The supply-side effects show that a tax cut on labor income employment and potential GDP.

Correct Answer
verified

Correct Answer
verified
The analysis is incorrect because whenev...
View Answer

Correct Answer
verified

Correct Answer
verified
The country has a bu...
View Answer

Correct Answer
verified

Correct Answer
verified
Aggregate demand increases. The governme...
View Answer

Correct Answer
verified
Automatic stabilizers are features of fi...
View Answer

Correct Answer
verified

Correct Answer
verified

When the FOMC raises the federal funds rate, almost immediately and a few weeks later the .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Government expenditure change potential GDP and taxes change potential GDP.

Correct Answer
verified

Correct Answer
verified
The statement is incorrect because, even...
View Answer

Correct Answer
verified

Correct Answer
verified
A rise in the federal funds leads to inv...
View Answer

Correct Answer
verified