Question

QUESTION 1

1. Which of the following is an example of an automatic fiscal policy stabilizer?

   	a.	Tax revenues fall as real GDP decreases.
   	b.	Congress decides to cut spending on national defense.
   	c.	Congress cuts individual income tax rates.
   	d.	Tax revenues rise after Congress raises corporate tax rates.

QUESTION 7

1. When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit.

   	a.	smaller deficit
   	b.	larger deficit
   	c.	smaller surplus

QUESTION 9

1. Expansionary fiscal policy might include which of the following?

   	a.	Reduction in taxes or lowered government spending.
   	b.	Increase in taxes or increased government spending.
   	c.	Reduction of taxes or increased government spending.

QUESTION 12

1. A typical ________ fiscal policy allows government to decrease the level of aggregate demand, through increases in tax rates.

   	a.	discretionary and expansionary
   	b.	discretionary and contractionary
   	c.	contractionary and automatic

QUESTION 15

1. A flat tax

   	a.	is a progressive tax.
   	b.	imposes a single, identical tax rate on the income of all taxpayers.
   	c.	imposes a regressive tax decreases with income.

QUESTION 18

1. A major concern of fiscal policy is

   	a.	how changes to the money supply affect aggregate demand.
   	b.	how changes to the budget affect the money supply.
   	c.	how federal government taxing and spending affects aggregate demand.

QUESTION 25

1. Assume the government has a budget deficit and that the economy is experiencing a recession, tax receipts (collected) by the government are likely to

   	a.	decrease and increase the budget deficit.
   	b.	decrease and decrease the budget deficit.
   	c.	increase and reduce the budget deficit.

QUESTION 28

1. Besides education, what other areas within its borders is a state responsible for funding?

   	a.	federal highways and parkes and religious organizations
   	b.	roads, parks, police and fire protection, libraries
   	c.	banks, weather mitigation equipment, stadiums and their security

QUESTION 32

1. How federal government taxing and spending affects aggregate demand is

   	a.	a major concern of fiscal policy.
   	b.	a major concern of international policy.
   	c.	a major concern of corporate policies.

QUESTION 34

1. How would a balanced budget amendment change the effect of automatic stabilizer programs?

   	a.	They could no longer exist because the government would not have a way to pay for these programs.
   	b.	They would lose flexibility because spending could not increase unless funds were there.
   	c.	They would increase in flexibility because they could kick in before Congress has time to adjust the budget.

QUESTION 58

1. Which of the following makes up the largest share of federal tax revenues comes?

   	a.	excise taxes
   	b.	estate taxes
   	c.	payroll taxes (for Social Security & Medicare)

Answer 1

1 option A correct

Explanation- The stabilizer fiscal policy shows the balance between demand and supply. If tax revenue is falling then it is natural for GDP to fall.

2. Option A correct

Explanation-  In this situation, production is being underestimated by potential GDP, so the actual deficit will increase.

3. Option D correct

Explanation - The goal of expansionary monetary policy is to end the recession or increase the inflation rate and this can happen only if the tax rate is reduced or government spending is increased.

4. Option C correct

Explanation - The goal under contractionary monetary policy is to reduce the inflation rate, so the government has to reduce aggregate demand, and raise the tax rate so that the economic prosperity rate decreases.