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1 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Each of the following is a goal of fiscal policy except |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | a balanced budget. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | relatively full employment. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | price stability. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | a satisfactory rate of economic growth. |
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2 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Fiscal policy is conducted by |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | the president. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | Congress. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | the president and Congress. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | the Federal Reserve. |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | the Office of Management and Budget. |
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3 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Which is the most accurate statement? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | Fiscal policy in the 1990s was very successful. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | It is possible to have an inflationary gap and a deflationary gap simultaneously. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | It is good fiscal policy to balance the budget virtually every year. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | Although the budget deficit was reduced and then eliminated in the 1990s, Presidents George Bush and Bill Clinton do not deserve much of the credit. |
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4 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Statement I. When there is a deflationary gap, equilibrium GDP is less than full employment GDP.
Statement II. There is no known fiscal policy to eliminate a deflationary gap. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | Statement I is true and statement II is false. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | Statement II is true and statement I is false. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | Both statements are true. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | Both statements are false. |
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5 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) When there is a recession liberals would call for ________ and conservatives would call
for_______. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | a tax cut, a tax cut |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | higher government spending, higher government spending |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | a tax cut, higher government spending |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | higher government spending, a tax cut |
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6 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) When MPC rises, the value of the multiplier |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | rises. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | falls. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | stays the same. |
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7 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If investment falls by $20 billion and the MPC is .5, then GDP will |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | fall by $10 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | fall by $20 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | fall by $30 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | fall by $40 billion. |
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8 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) As the distance between equilibrium GDP and the full-employment GDP rises, the multiplier |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | rises. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | falls. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | stays the same. |
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9 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Which is the most accurate statement about the automatic stabilizers? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | They were all enacted under the New Deal. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | They have been responsible for the prosperity of the 1990s by preventing recessions. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | They moderate the business cycle by making recessions less severe and by damping down economic booms |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | They have been completely ineffective and should be scrapped. |
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10 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) James Baldwin earns $500 a week, brings home $400 a week after taxes, and spends $350 a week. If he loses his job and collects unemployment insurance benefits, what is your best guess as to how much he now spends each week. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | $400 |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | $350 |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | $300 |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | $200 |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | 0 |
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11 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Statement I. Discretionary fiscal policy is virtually the same as the workings of the automatic
stabilizers. Statement II. The New Deal was largely discretionary fiscal policy. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | Statement I is true and statement II is false. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | Statement II is true and statement I is false. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | Both statements are true. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | Both statements are false. |
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12 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) We have had budget deficits for decades until the year |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | 1994. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | 1996. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | 1998. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | 2000. |
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13 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) At their peak our federal budget deficits reached almost |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | $100 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | $200 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | $300 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | $400 billion. |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | $500 billion. |
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14 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Statement I. In 1997 a balanced budget amendment was ratified by the states and became part of
the constitution. Statement II. Most economists favored passage of a balanced budget amendment to the constitution. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | Statement I is true and statement II is false. |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | Statement II is true and statement I is false. |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | Both statements are true. |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | Both statements are false. |
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15 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) What gives the president most of his power to shape fiscal policy? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | his annual state of the union address |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | his annual budget |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | his veto power |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | his control of the federal bureaucracy |
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