Question

5. If data indicate the economy is in recession and members of Congress are working to pass legislation to encourage economic growth, which of the following has almost certainly occurred?
	a. Realization of results
	b. Recognition of change in the economy
	c. Implementation of policy
	d. Analysis of policy's effectiveness

6. Which of the following is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment?
	a. A business cycle
	b. A recession
	c. A bubble
	d. A transfer program

7. If government is increasing spending and decreasing taxes, what type of policy is it conducting?
	a. Expansionary monetary policy
	b. Contractionary monetary policy
	c. Contractionary fiscal policy
	d. Expansionary fiscal policy

8. Which of the following is an automatic stabilizer in the economy?
	a. Spending on national defense
	b. Provision of unemployment compensation
	c. Spending on education
	d. Provision of Social Security and Medicare

9. Which of the following is a severe and long-lasting economic downturn that is worse and deeper than a recession?
	a. A contraction
	b. The business cycle
	c. An expansion
	d. A depression

10. Which of the following best defines government revenue?
	a. Government programs designed to improve economic equity
	b. Income the government receives from taxes and other nontax sources
	c. Money the government spends to buy goods and services
	d. A tax for which high-income earners pay a larger fraction of their income in taxes than low-income earners

11. To calculate real gross domestic product (GDP), gross domestic product must be adjusted for which variable?
	a. Population
	b. Inflation
	c. Deficit
	d. Debt

12. If the unemployment rate is declining, the economy is likely experiencing which one of the following?
	a. A recession
	b. An expansion
	c. A depression
	d. A contraction

13. Congress might lower taxes if the economy appears to be in
	a. a period of expansion.
	b. a recessionary period.
	c. a period of increased employment.
	d. a period of increasing GDP.

14. Which of the following is true of active fiscal policy actions?
	a. Policymakers can pinpoint the economic outcomes of their policies.
	b. The political process makes it easy to pass needed actions in times of economic crisis.
	c. Economic conditions will stay the same without policymaker action.
	d. It is often difficult for policymakers to know whether policies had any impact on the economy.

Answer 1

5. Option B

Explanation: The government has just realised the changes in the economy and the need to enact a policy.

6. Option B

Explanation: In recession, there is a prolonged decline in economic output and increase in unemployment.

7. Option D

Explanation: In expansionary fiscal policy, the government increases expenditure or lowers taxes.

8. Option B

Explanation: An automatic stabilizer comes into action automatically when a particular economic event occurs.