Question 1

Being a side effect of fiscal policy on the supply side, the provision of public goods and services __________ productivity and potential GDP.

A. does not affect
B. decreases
C. increases
D. can hinder or stimulate

Question 2

Income taxes create a difference between the interest rate paid by companies and received by lenders. These taxes __________ saving, investment, and the growth rate of real GDP.

A. do not affect
B. lower
C. encourage, but may not change
D. increase

Question 3

On the outlays side of the budget, how are Social Security benefits, Medicare and Medicaid benefits, unemployment benefits, and other cash benefits to individuals and businesses labeled?

A. expenditure on goods and services
B. transfer payments
C. debt interest
D. indirect taxes

Question 4

In the long run, an increase in the supply of bank loans is matched by a __________ in the price level and the quantity of real loans is __________.

A. rise; unchanged
B. rise; increased
C. fall; unchanged
D. fall; decrease

Question 5

The U.S. fiscal year runs from __________.

A. July 1 to June 30
B. August 1 to July 31
C. September 1 to August 31
D. October 1 to September 30

Question 6

According to the government expenditure multiplier, when government expenditure increases, aggregate demand increases. Other things remaining the same, what happens to the real GDP?

A. real GDP remains stable
B. real GDP increases
C. real GDP decreases
D. real GDP induces a decrease in consumption expenditure

Question 7

A government budget deficit __________ the real interest rate and "crowds out" some private investment, which slows real GDP growth.

A. distorts
B. decreases
C. increases
D. does not affect

Question 8

The use of the federal budget to achieve macroeconomic objectives is called __________.

A. balanced budgeting
B. fiscal policy
C. fiscal responsibility
D. national debt consolidation

Question 9

The Fed pays close attention to the __________, which is the annual percentage change in the Personal Consumption Expenditure deflator (PCE deflator. excluding the prices of food and fuel.

A. input gap
B. output gap
C. core employment rate
D. core inflation rate

Question 10

A variable that the Fed can directly control or closely target, and which influences the economy in desirable ways, is known as a(n. __________.

A. fiscal policy instrument
B. monetary policy instrument
C. operational instrument
D. economic instrument

Question 11

Three components of aggregate expenditure that are affected by a change in the federal funds rate are consumption expenditure, investment, and __________.

A. net imports
B. net exports
C. total imports
D. total exports

Question 12

An increase in the supply of loanable funds is an increase in __________.

A. the inflation rate
B. the unemployment
C. federal funds rate
D. investments

Question 13

If the Fed decides to implement an expansionary monetary policy, it will __________ the federal funds rate using an open market sale.

A. raise
B. lower
C. not change
D. raise then lower

Question 14

A __________ gap leads to inflation and a __________ gap leads to unemployment.

A. negative; positive
B. positive; negative
C. negative; near zero
D. near zero; positive

Question 15

What type of stabilizing fiscal policy is an increase in the health care budget for citizens without coverage?

A. automatic fiscal policy
B. discretionary fiscal policy
C. contractionary fiscal policy
D. long run fiscal policy

Question 16

If real GDP is below potential GDP, the government might decrease its expenditure on goods and service, decrease transfer payments, raise taxes, or do some combination of all three. This is called a(n. __________.

A. automatic fiscal policy
B. discretionary fiscal policy
C. contractionary fiscal policy
D. fiscal stimulus

Question 17

What type of stabilizing fiscal policies arise because tax revenues and outlays fluctuate with the real GDP?

A. automatic fiscal policies
B. discretionary fiscal policies
C. contractionary fiscal policies
D. long run fiscal policies

Question 18

What is the annual statement of the revenues, outlays, and surplus or deficit of the government, together with the laws and regulations that authorize these revenues and outlays?

A. the federal budget
B. the fiscal policy
C. the fiscal year budget
D. the national debt

Question 19

It generally takes __________ for monetary policy action to affect real GDP and about __________ for the policy to affect the inflation rate.

A. 2 years; 4 years
B. 1 year; 5 years
C. 2 years; 3 years
D. 1 year; 2 years

Question 20

If real GDP is greater than potential GDP with inflation being a problem, the Fed will __________ the federal funds rate using a(n. __________.

A. lower; open market sale
B. raise; closed market sale
C. raise; open market sale
D. lower; closed market sale.