1. 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
2. Which of the following is the definition of government expenditures?
a. Money the government spends to buy goods and services
b. An itemized summary of probable government revenue and expenses for a given period
c. Central bank actions using interest rate or money supply tools to achieve goals such as stable prices, maximum employment, and moderate long-term interest rates
d. The total market value, expressed in dollars, of all final goods and services produced in an economy in a given year
3. 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
4. To calculate real gross domestic product (GDP), gross domestic product must be adjusted for which variable?
a. Population
b. Inflation
c. Deficit
d. Debt
5. 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
6. 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.
7. Which of the following best defines inflation?
a. The rapid increase in the price of a specific good, such as gasoline
b. A general, sustained upward movement of prices for goods and services in an economy
c. The fluctuation in revenue and expenditures caused by Congress and the president
d. An increase in the national debt caused by ongoing deficit spending
8. 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
9. 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.
9. 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