Macro Economics Chapter 13(questions and answers)2022

The group of three economists appointed by the president to provide fiscal policy recommendations is the: Council of Economic Advisers. Joint Economic Committee. Bureau of Economic Analysis. Federal Reserve Board of Governors. Council of Economic Advisers. Discretionary fiscal policy refers to: any change in government spending or taxes that destabilizes the economy. the authority that the president has to change personal income tax rates. intentional changes in taxes and government expenditures made by Congress to stabilize the economy. the changes in taxes and transfers that occur as GDP changes. intentional changes in taxes and government expenditures made by Congress to stabilize the economy. 00:16 01:29 Countercyclical discretionary fiscal policy calls for: surpluses during recessions and deficits during periods of demand-pull inflation. deficits during recessions and surpluses during periods of demand-pull inflation. surpluses during both recessions and periods of demand-pull inflation. deficits during both recessions and periods of demand-pull inflation. deficits during recessions and surpluses during periods of demand-pull inflation. Fiscal policy refers to the: deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level. deliberate changes in government spending and taxes to achieve greater equality in the distribution of income. altering of the interest rate to change aggregate demand. fact that equal increases in government spending and taxation will be contractionary. deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level. Expansionary fiscal policy is so named because it: involves an expansion of the nation's money supply. necessarily expands the size of government. is aimed at achieving greater price stability. is designed to expand real GDP. is designed to expand real GDP. Contractionary fiscal policy is so named because it: involves a contraction of the nation's money supply. necessarily reduces the size of government. is aimed at reducing aggregate demand and thus achieving price stability. is expressly designed to expand real GDP. is aimed at reducing aggregate demand and thus achieving price stability. An economist who favors smaller government would recommend: tax cuts during recession and reductions in government spending during inflation. tax increases during recession and tax cuts during inflation. tax cuts during recession and tax increases during inflation. increases in government spending during recession and tax increases during inflation. tax cuts during recession and reductions in government spending during inflation. An economist who favored expanded government would recommend: tax cuts during recession and reductions in government spending during inflation. tax increases during recession and tax cuts during inflation. tax cuts during recession and tax increases during inflation. increases in government spending during recession and tax increases during inflation. increases in government spending during recession and tax increases during inflation. Discretionary fiscal policy will stabilize the economy most when: deficits are incurred during recessions and surpluses during inflations. the budget is balanced each year. deficits are incurred during inflations and surpluses during recessions. budget surpluses are continuously incurred. deficits are incurred during recessions and surpluses during inflations. Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward: an equality of tax receipts and government expenditures. an excess of tax receipts over government expenditures. an excess of government expenditures over tax receipts. a reduction of subsidies and transfer payments and an increase in tax rates. an excess of government expenditures over tax receipts. Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? A congressional proposal to incur a federal surplus to be used for the retirement of public debt. Reductions in agricultural subsidies and veterans' benefits. Postponement of a highway construction program. Reductions in federal tax rates on personal and corporate income. Reductions in federal tax rates on personal and corporate income. Which of the following represents the most expansionary fiscal policy? A $10 billion tax cut. A $10 billion increase in government spending. A $10 billion tax increase. A $10 billion decrease in government spending. A $10 billion increase in government spending. Which of the following represents the most contractionary fiscal policy? A $30 billion tax cut. A $30 billion increase in government spending. A $30 billion tax increase. A $30 billion decrease in government spending. A $30 billion decrease in government spending. A contractionary fiscal policy is shown as a: rightward shift in the economy's aggregate demand curve. rightward shift in the economy's aggregate supply curve. movement along an existing aggregate demand curve. leftward shift in the economy's aggregate demand curve. leftward shift in the economy's aggregate demand curve. An expansionary fiscal policy is shown as a: rightward shift in the economy's aggregate demand curve. movement along an existing aggregate demand curve. leftward shift in the economy's aggregate supply curve. leftward shift in the economy's aggregate demand curve. rightward shift in the economy's aggregate demand curve. Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it is experiencing: (Pic16) a positive GDP gap. a negative GDP gap. inflation. an adverse supply shock. a negative GDP gap. Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it is experiencing: (Pic17) a positive GDP gap. a negative GDP gap. a recession. cost-push inflation. a positive GDP gap. Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD3 to AD2 is consistent with: (Pic18) an expansionary fiscal policy. a major recession. a contractionary fiscal policy. demand-pull inflation. a contractionary fiscal policy. Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with: (Pic19) an expansionary fiscal policy. a major recession. a contractionary fiscal policy. severe demand-pull inflation. an expansionary fiscal policy. In the diagram, it is assumed that investment, net exports, and government purchases: (Pic20) are leakages from the circular flow. are independent of the level of GDP. vary inversely with GDP. vary directly with GDP. are independent of the level of GDP. Built-in stability means that: an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. A major advantage of the built-in or automatic stabilizers is that they: simultaneously stabilize the economy and reduce the absolute size of the public debt. automatically produce surpluses during recessions and deficits during inflations. require no legislative action by Congress to be made effective. guarantee that the federal budget will be balanced over the course of the business cycle. require no legislative action by Congress to be made effective. Which of the following best describes the built-in stabilizers as they function in the United States? The size of the multiplier varies inversely with the level of GDP. Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises. Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises. Refer to the diagram in which T is tax revenues and G is government expenditures. All figures are in billions. If GDP is $400: (Pic24) there will be a budget deficit. there will be a budget surplus. the budget will be balanced. the macroeconomy will be in equilibrium. the budget will be balanced. Refer to the diagram in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit: (Pic25) at all levels of GDP. at any level of GDP above $400. at any level of GDP below $400. only when GDP is stable. at any level of GDP below $400. Refer to the diagram in which T is tax revenues and G is government expenditures. All figures are in billions. In this economy: (Pic26) tax revenues and government spending both vary directly with GDP. tax revenues vary directly with GDP, but government spending is independent of GDP. tax revenues and government spending both vary inversely with GDP. government spending varies directly with GDP, but tax revenues are independent of GDP. tax revenues vary directly with GDP, but government spending is independent of GDP. The cyclically adjusted budget tells us: that in a full-employment economy, the federal budget should be in balance. that tax revenues should vary inversely with GDP. what the size of the federal budget deficit or surplus would be if the economy was at full employment. the actual budget deficit or surplus realized in any given year. what the size of the federal budget deficit or surplus would be if the economy was at full employment. When current government expenditures exceed current tax revenues and the economy is achieving full employment: the cyclically adjusted budget has neither a deficit nor a surplus. the cyclically adjusted budget has a deficit. fiscal policy is contractionary. the cyclically adjusted budget has a surplus. the cyclically adjusted budget has a deficit. When current tax revenues exceed current government expenditures and the economy is achieving full employment: the cyclically adjusted budget has neither a deficit nor a surplus. the cyclically adjusted budget may have either a deficit or a surplus. the cyclically adjusted budget has a surplus. the government is engaging in an expansionary fiscal policy. the cyclically adjusted budget has a surplus. If the full-employment GDP for the economy is at L, then we can say with certainty that the: (Pic30) actual budget will have a deficit. cyclically adjusted budget will have a deficit. actual budget will have a surplus. cyclically adjusted budget will have a surplus. cyclically adjusted budget will have a surplus.