Question 1

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 answer of A country reports that its government outlays...

Question 2

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?
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

Accepted Answer

During a recession or depression, the appropriate federal government policy combination to improve economic performance is to use expansionary fiscal and monetary policies. Option A includes both expansionary fiscal and monetary policies. An increase in government expenditure will boost aggregate demand, decrease unemployment, and increase real GDP. A decrease in taxes will boost consumer spending, increase disposable income, and boost aggregate demand. An increase in the quantity of money will lower interest rates, increase investment spending, and boost aggregate demand. Therefore, option A is the best choice.

Question 3

Define the balanced budget multiplier and explain how it works. In your answer, ignore any supply-side effects.

Accepted Answer

The answer of Define the balanced budget multiplier and explain...

Question 4

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

Accepted Answer

The answer of When government outlays exceed tax revenues, does...

Question 5

"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 answer of "As long as supply-side effects are ignored,...

Question 6

"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 answer of "As the saying goes, the only sure...

Question 7

Describe the difference between discretionary and automatic fiscal policy.

Accepted Answer

The answer of Describe the difference between discretionary and automatic...

Question 8

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

Accepted Answer

The answer of \[\begin{array} { c c c } 
&...

Question 9

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

Accepted Answer

The answer of "The federal budget is required by law...

Question 10

During the late 1960s, real GDP increased, unemployment fell, and the inflation rate started to rise. Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?
A)increase government expenditures, decrease taxes, increase the quantity of money
B)increase government expenditures, decrease taxes, decrease the quantity of money
C)decrease government expenditures, increase taxes, decrease the quantity of money
D)do not change government expenditures or taxes , increase the quantity of money
E)increase government expenditures, decrease taxes, do not change the quantity of money

Accepted Answer

The appropriate federal government policy combination to improve economic performance by lowering the inflation rate would be to decrease government expenditures, increase taxes, and decrease the quantity of money. decreasing government expenditures will help to reduce the demand-pull inflation, as the government's spending is reduced. Increasing taxation will reduce the amount of money in circulation, leading to lower demand and a reduction in inflation. Lastly, decreasing the quantity of money will lower the money supply, resulting in less spending and lower inflation.

Question 11

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

Accepted Answer

The answer of Discuss the federal budget history of the...

Question 12

The Fed increases the quantity of money to counteract
A)a recessionary gap.
B)a federal budget surplus.
C)negative net exports.
D)an inflationary gap.
E)inflation.

Accepted Answer

The answer of The Fed increases the quantity of money...

Question 13

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

The answer of If the government increases expenditure by $40...

Question 14

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Accepted Answer

The answer of Depending on the relative size of the...

Question 15

"Discretionary fiscal policy is a fiscal action initiated by an act of the Federal Reserve, while automatic fiscal policy is a fiscal action induced by the state of the economy." Is the previous statement correct or incorrect?
 Explain your answer.

Accepted Answer

The answer of "Discretionary fiscal policy is a fiscal action...

Question 16

Assume the federal government raises taxes (a contractionary fiscal policy). If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________.
A)decrease; decrease
B)increase; be unchanged
C)increase; increase
D)decrease; be unchanged
E)increase; decrease

Accepted Answer

If the tax increase affects AS and AD equally, it will result in a proportionate decrease in both aggregate demand and aggregate supply causing a shift to the left of the AD and AS curves. This will lead to a decrease in real GDP and an ambiguous effect on the price level, which means that it might remain unchanged or decrease depending on the slope of the AS curve. Thus, option D is the best answer as it is the only one that shows a decrease in real GDP and an ambiguous effect on the price level.

Question 17

The Fed decreases the quantity of money to counteract
A)a recessionary gap.
B)a federal budget deficit.
C)positive net exports.
D)an inflationary gap.
E)a rise in the unemployment rate.

Accepted Answer

When there is an inflationary gap, which occurs when aggregate demand exceeds aggregate supply, prices tend to rise. In this situation, the Fed may decrease the quantity of money in order to reduce the demand for goods and services and bring prices back down to equilibrium.

Question 18

Explain the difference between discretionary and automatic fiscal policy. Provide examples of each.

Accepted Answer

The answer of Explain the difference between discretionary and automatic...

Question 19

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier?
 Explain your answer.

Accepted Answer

The answer of Ignoring any supply-side effects, how does the...

Question 20

Need-based spending ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.
A)increases; decreases; recession
B)decreases; increases; expansion
C)decreases; increases; recession
D)decreases; decreases; expansion
E)increases; decreases; expansion

Accepted Answer

Need-based spending, such as on social welfare programs, tends to increase during a recession as more people may require assistance due to job loss or other economic hardships. Conversely, during an expansion, fewer people may need this assistance and spending may decrease. This pattern leads to larger budget deficits (meaning the government is spending more than it is taking in) during the recession phase of the business cycle.

Quiz 20: Fiscal Policy and Monetary Policy

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?

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?

Define the balanced budget multiplier and explain how it works. In your answer, ignore any supply-side effects.

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

"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.

"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.

Describe the difference between discretionary and automatic fiscal policy.

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

During the late 1960s, real GDP increased, unemployment fell, and the inflation rate started to rise. Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

The Fed increases the quantity of money to counteract

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.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

"Discretionary fiscal policy is a fiscal action initiated by an act of the Federal Reserve, while automatic fiscal policy is a fiscal action induced by the state of the economy." Is the previous statement correct or incorrect? Explain your answer.

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will and the price level will .

The Fed decreases the quantity of money to counteract

Explain the difference between discretionary and automatic fiscal policy. Provide examples of each.

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier? Explain your answer.

Need-based spending during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.

Quiz 20: Fiscal Policy and Monetary Policy

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?

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?

Define the balanced budget multiplier and explain how it works. In your answer, ignore any supply-side effects.

When government outlays exceed tax revenues, does the government have a budget deficit or surplus?

"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.

"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.

Describe the difference between discretionary and automatic fiscal policy.

"The federal budget is required by law to balance." Is the previous statement correct or incorrect?

During the late 1960s, real GDP increased, unemployment fell, and the inflation rate started to rise. Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?

Discuss the federal budget history of the United States since 1970. Make sure to note specifically the budget position of the United States during the last of the 1990s and compare it to the situation in 2012.

The Fed increases the quantity of money to counteract

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.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions. What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

"Discretionary fiscal policy is a fiscal action initiated by an act of the Federal Reserve, while automatic fiscal policy is a fiscal action induced by the state of the economy." Is the previous statement correct or incorrect? Explain your answer.

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________.

The Fed decreases the quantity of money to counteract

Explain the difference between discretionary and automatic fiscal policy. Provide examples of each.

Ignoring any supply-side effects, how does the magnitude of the government expenditure multiplier compare to the magnitude of the tax multiplier? Explain your answer.

Need-based spending ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Assume the federal government raises taxes (a contractionary fiscal policy) . If the tax increase affects AS and AD equally, then real GDP will and the price level will .

Need-based spending during an expansion and during a recession, which leads to larger budget deficits during the phase of the business cycle.