Question 1

-Refer to the graph above to answer this question.What do both ab and fg represent?
A)An inflationary gap.
B)A recessionary gap.
C)A budget surplus.
D)A budget deficit.

Accepted Answer

D

Question 2

What has been the main purpose of fiscal policy,as used by most governments,since WWII?
A)To achieve the goal of full employment.
B)To achieve the goal of stable prices.
C)To achieve the twin goals of full employment and a viable balance of payments.
D)To achieve the twin goals of stable prices and a viable balance of payments.
E)To achieve the twin goals of full employment and stable prices.

Accepted Answer

Since WWII, the main purpose of fiscal policy, as used by most governments, has been to achieve the twin goals of full employment and stable prices. This is achieved through various fiscal policy tools such as government spending and taxation policies that aim to stimulate or cool down the economy as needed to maintain these goals.

Question 3

What is counter-cyclical fiscal policy?
A)Government taxation policy aimed at a balanced budget.
B)Government spending and taxation policy aimed at a balanced budget.
C)Deliberate adjustments in the level of government spending and taxation in order to close recessionary or inflationary gaps.
D)Deliberate adjustments in the level of government spending and taxation in order to ensure equilibrium GDP.

Accepted Answer

Counter-cyclical fiscal policy is a deliberate adjustment in government spending and taxation in response to economic conditions. The goal is to stabilize the economy during periods of recession or inflation by closing any gaps in demand and supply. This is achieved by increasing government spending and/or decreasing taxes during a recession and decreasing government spending and/or increasing taxes during periods of inflation. A balanced budget is not necessarily the goal of counter-cyclical fiscal policy.

Question 4

Suppose that the government's total tax receipts are $130,government spending on goods and services is $100 and transfer payments are $40.What are net tax revenues?
A)-$10.
B)+$30.
C)+$70.
D)+$90.

Accepted Answer

The answer of Suppose that the government's total tax receipts...

Question 5

All of the following,except one,are outlays categories in the federal government's budget plan.Which is the exception?
A)Transfers to persons.
B)International debt charges.
C)Public debt charges.
D)Spending grants to other levels of government.
E)Direct program spending.

Accepted Answer

The federal government's budget plan includes categories for Transfers to persons, Public debt charges, Spending grants to other levels of government, and Direct program spending. However, International debt charges are not an outlay category in the budget plan, as they are part of the interest paid on the government's outstanding debt to foreign creditors.

Question 6

-Refer to the graph above to answer this question.What do both de and ij represent?
A)An inflationary gap.
B)A recessionary gap.
C)A budget surplus.
D)A budget deficit.

Accepted Answer

The answer of 
-Refer to the graph above to answer...

Question 7

Refer to the graph to answer this question.Which of the following is verified by the graph? A)That a budget surplus exists if government spending is G₁ and real GDP is Y₁. B)That a budget deficit exists if government spending is G₂ and real GDP is Y₁. C)The reduction in government spending from G₁ to G₂ would produce real GDP equilibrium at Y₁. D)If government spending was reduced from G₁ to G₂ the budget surplus at Y2 would disappear if real GDP remained at Y₃. E)That the budget is balanced if government spending is G₁ and real GDP is Y₃.

Accepted Answer

The answer of Refer to the graph to answer this...

Question 8

What is government spending on goods and services in excess of net tax revenue called?
A)Monetizing the debt.
B)A budget deficit.
C)A budget surplus.
D)Pro-cyclical fiscal policy.

Accepted Answer

A budget deficit occurs when government spending on goods and services exceeds the amount of net tax revenue collected. This results in the government having to borrow money to finance its operations, which leads to an increase in the national debt.

Question 9

What is the national debt?
A)The sum of the federal government's budget deficits less surpluses.
B)The total amount borrowed domestically by all levels of government.
C)The total amount borrowed domestically and internationally by all levels of government.
D)The amount owed by the federal government to the World Bank.

Accepted Answer

The national debt is the sum of all the past years' deficits and surpluses, where a deficit adds to the national debt and a surplus reduces it. It represents the total amount owed by the federal government, not the amount owed to a specific entity like the World Bank, nor does it exclusively pertain to domestic borrowing or include all levels of government.

Question 10

-Refer to the graph above to answer this question.Which of the following is true?
A)A balanced budget would occur at income level Y1.
B)A balanced budget would occur at income level Y2.
C)A balanced budget could occur at income levels Y1,Y2 or Y3.
D)The existence of a balanced budget cannot be determined because no information on tax revenues is given.

Accepted Answer

The answer of 
-Refer to the graph above to answer...

Question 11

-Refer to the graph above to answer this question.What does this graph indicate?
A)That government spending is autonomous of real GDP and that net tax revenue is a function of real GDP.
B)That government spending is a function of real GDP and that net tax revenue is autonomous of real GDP.
C)That budget surpluses are possible only at lower levels of real GDP.
D)That budget deficits are possible only at higher levels of real GDP.
E)That a balanced budget can occur at any level of real GDP except Y2.

Accepted Answer

The graph (though not visible here) typically shows government spending as a flat line, indicating it does not change with real GDP, making it autonomous. Net tax revenue usually slopes upwards, indicating it increases with real GDP, making it a function of real GDP.

Question 12

Suppose that the government's total tax receipts are $130,government spending on goods and services is $100 and transfer payments are $40.What is the government's budget surplus or deficit?
A)A surplus of $30.
B)A surplus of $10.
C)A deficit of $30.
D)A deficit of $10.

Accepted Answer

The government's budget deficit is calculated as its spending (including both goods and services and transfer payments) minus its total tax receipts. Here, spending is $100 + $40 = $140, and tax receipts are $130. Therefore, the deficit is $140 - $130 = $10.

Question 13

What is a balanced budget?
A)It is the equality of tax revenues and government spending on goods and services.
B)It is the equality of net tax revenues and government spending on goods and services
C)It is the absence of government debt.
D)It is a budget where the government spends over many categories in a balanced fashion.

Accepted Answer

A balanced budget refers to the equality of net tax revenues (tax revenues minus transfer payments) and government spending on goods and services. This means that the government is not running a deficit (spending more than it takes in) or a surplus (taking in more than it spends). Option A is incorrect as it only refers to tax revenues, not net tax revenues. Option C is incorrect as a balanced budget can still exist even if there is government debt, as long as the debt is stable and manageable. Option D is incorrect as it does not accurately describe a balanced budget.

Question 14

What determines the state of the government's budget?
A)The level of its spending.
B)Its tax rates.
C)Its tax rates and the exchange rate.
D)Both the level of GDP in the economy as well as tax rates and its own spending.
E)Both the level of GDP in the economy as well as tax rates and the exchange rate.

Accepted Answer

The state of government's budget is determined by both the level of GDP in the economy, as it determines the government's revenue through taxes, and the combination of tax rates and the government's own spending, which determine the government's expenditures. Therefore, option D, which includes both GDP, tax rates, and government spending, is the best choice. The exchange rate, while it can impact the economy, does not directly determine the state of the government's budget.

Question 15

What is fiscal policy?
A)It is the government's approach to its own spending and taxation.
B)It is the use of interest rate policy by the central bank to stabilize an economy.
C)It is the total spending by all levels of government.
D)It is the central bank's approach to interest rate policy.
E)It is employed by governments only when the economy is experiencing a recessionary gap.

Accepted Answer

Fiscal policy refers to the government's approach to its own spending and taxation, including how it allocates funds and collects revenue. It is a tool used by governments to influence economic activity and can be expansionary (increasing spending and/or decreasing taxes to stimulate growth) or contractionary (decreasing spending and/or increasing taxes to slow down an overheated economy).

Question 16

What is a budget deficit?
A)It is government spending of all types in excess of net tax revenue.
B)It is government spending on goods and services in excess of net tax revenue.
C)It is government spending of all types plus net tax revenues.
D)It is the amount by which federal government spending of all types is below net tax revenues.

Accepted Answer

A budget deficit occurs when a government spends more on goods and services than it collects in taxes. Option B correctly states that it is government spending on goods and services in excess of net tax revenue. Option A is similar but omits the reference to goods and services, while Option C is incorrect as it includes net tax revenues as part of the spending. Option D is the opposite of a deficit and refers to a surplus.

Question 17

-Refer to the graph above to answer this question.What does this graph indicate?
A)That Y1,Y2 and Y3 could all be equilibrium levels of real GDP.
B)That Y2 is the equilibrium level of real GDP.
C)That government spending and the size of the budget surplus or deficit are unrelated.
D)That net tax revenues depend on tax rates but not on the level of real GDP.
E)That the budget line is unrelated to NTR.

Accepted Answer

The answer of 
-Refer to the graph above to answer...

Question 18

-Refer to the graph above to answer this question.What does this graph indicate?
A)That net tax revenues,government spending and the government's budget all depend on the level of real GDP.
B)That the state of the government's budget depends on the level of real GDP as well as on tax rates and its own spending.
C)That the level of real GDP depends on the slope of the budget line.
D)That real GDP level Y2 is equilibrium GDP.
E)That real GDP level Y2 is both equilibrium GDP and a balanced budget.

Accepted Answer

The graph likely shows the relationship between government budget components and real GDP, indicating that the budget's state is influenced by GDP levels, tax rates, and government spending.

Question 19

Which of the following is a correct statement about the federal government's budget?
A)It has been in a deficit continuously since the 1960s.
B)It has been in a surplus continuously since the 1960s.
C)It has been in a deficit in the last few years after decades of surpluses.
D)It has been in a surplus in the last few years after decades of deficits.

Accepted Answer

The federal government's budget was in surplus in the late 1990s and early 2000s, but has been in a deficit in the last few years. Therefore, option C is the correct statement. Options A and B are incorrect as they present extreme scenarios of continuous deficits or surpluses. Option D is also incorrect as it presents a scenario that is opposite to the actual one.

Question 20

What is net tax revenue in excess of government spending on goods and services called?
A)Gross tax revenue.
B)A budget deficit.
C)A budget surplus.
D)Transfer payments.

Accepted Answer

Net tax revenue in excess of government spending on goods and services is called a budget surplus. This means that the government is collecting more revenue than it is spending, resulting in a surplus of money that can be used for paying off debt, investing in programs or even returning some of the surplus to taxpayers in the form of tax cuts. Gross tax revenue refers to the total tax revenue collected by the government, while a budget deficit occurs when government spending exceeds its revenue. Transfer payments are payments made to individuals or groups without the expectation of receiving goods or services in return, such as social security or welfare payments.

Quiz 7: Fiscal Policy

-Refer to the graph above to answer this question.What do both ab and fg represent?

What has been the main purpose of fiscal policy,as used by most governments,since WWII?

What is counter-cyclical fiscal policy?

Suppose that the government's total tax receipts are $130,government spending on goods and services is $100 and transfer payments are $40.What are net tax revenues?

All of the following,except one,are outlays categories in the federal government's budget plan.Which is the exception?

-Refer to the graph above to answer this question.What do both de and ij represent?

Refer to the graph to answer this question.Which of the following is verified by the graph?

What is government spending on goods and services in excess of net tax revenue called?

What is the national debt?

-Refer to the graph above to answer this question.Which of the following is true?

-Refer to the graph above to answer this question.What does this graph indicate?

Suppose that the government's total tax receipts are $130,government spending on goods and services is $100 and transfer payments are $40.What is the government's budget surplus or deficit?

What is a balanced budget?

What determines the state of the government's budget?

What is fiscal policy?

What is a budget deficit?

-Refer to the graph above to answer this question.What does this graph indicate?

-Refer to the graph above to answer this question.What does this graph indicate?

Which of the following is a correct statement about the federal government's budget?

What is net tax revenue in excess of government spending on goods and services called?