Economics - Fiscal Policy Review

Question 1

A budget deficit is a shortfall of revenues compared to expenses

Accepted Answer

True

Question 2

In Keynes’s view, a short-term budget deficit due to government spending or tax cuts is _______

Accepted Answer

sometimes necessary to help stimulate the economy

Question 3

If the government spends more than it takes in through tax revenue, it will experience

Accepted Answer

a budget deficit

Question 4

According to Keynes, which sector of the economy could offset a decline in business spending?

Accepted Answer

government

Question 5

Interest rate changes are a key part of fiscal policy.

Accepted Answer

False

Question 6

If unemployment rises due to a financial crisis, which of the following is likely to occur?

Accepted Answer

government revenue from income and payroll taxes will fall

Question 7

Demand-side prescriptions for stimulating an economy are based on the philosophy of:

Accepted Answer

Wanniski

Question 8

All decisions involve trade offs and consequences

Accepted Answer

True

Question 9

Which is the primary source of revenue for the federal government?

Accepted Answer

taxes

Question 10

If the number of people eligible for Medicaid falls, which of the following is likely to occur?

Accepted Answer

government revenue from income and payroll taxes will rise

Question 11

Supply-side policies aim to _______

Accepted Answer

reduce the government’s role

Question 12

Supply-side and demand-side economic policies have the same goals.

Accepted Answer

True

Question 13

Which of the following groups does supply-side policy target through stimulation?

Accepted Answer

producers

Question 14

Decreasing taxes in order to increase aggregate demand in the economy is

Accepted Answer

Expansionary policy

Question 15

The opportunity cost of increasing federally funded college loans by raising taxes is:

Accepted Answer

Consumer spending

Question 16

The national debt is the sum of all past deficits minus past surpluses.

Accepted Answer

True

Question 17

Keynesian economic policies are designed to lower unemployment by _______

Accepted Answer

stimulating aggregate demand

Question 18

Which of these is NOT a limitation to demand-side policies:

Accepted Answer

Weak “Safety net” provisions in automatic stabilizers

Question 19

Automatic stabilizer: When incomes increase in economic downturn, without Congressional action

Accepted Answer

True

Question 20

Strategies for achieving economic goals have remained the same over time.

Accepted Answer

False

Question 21

Economic growth, full employment, and price stability are the goals of which policies?

Accepted Answer

Both philosophies share same goals

Question 22

Supply-side policies aim to grow the size of the federal government.

Accepted Answer

False

Question 23

The multiplier effect is when increased gov't spending multiplies through the economy.

Accepted Answer

True

Question 24

Monetary policy is a change in federal government spending or taxes

Accepted Answer

False

Question 25

In the model GDP = C + I + G + (X - M), “I” stands for _______

Accepted Answer

investment

Question 26

Fiscal policy may involve _______ .

Accepted Answer

taxing corporations

Economics - Fiscal Policy Review

Questions 26

Economics - Fiscal Policy Review

Questions 26