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| 1 | |
Of the following fiscal policies, which one is most expansionary? |
| | A) | $100 billion tax cut |
| | B) | $100 billion increase in government spending |
| | C) | $100 billion increase in both government spending and taxes |
| | D) | $100 billion decrease in both government spending and taxes |
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| 2 | |
Answer the next question on the basis of the following diagram.
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An expansionary fiscal policy is best represented by graph: |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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| 3 | |
In 2005, the debt held by the public as a percentage of GDP was about: |
| | A) | 17% |
| | B) | 69% |
| | C) | 31% |
| | D) | 116% |
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| 4 | |
The majority of the public debt does not represent a burden on future generations because: |
| | A) | future generations need pay back only the interest on borrowed funds, not the principal |
| | B) | the debt can be paid off by selling government land, buildings, and other real assets |
| | C) | the debt can be paid off by printing new money |
| | D) | the majority of the debt is owned by the U.S. public and institutions |
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| 5 | |
Compared to a proportional tax, a progressive tax system: |
| | A) | increases built-in stability |
| | B) | reduces built-in stability |
| | C) | increases the size of the standardized budget deficit |
| | D) | shifts the aggregate supply curve to the right |
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| 6 | |
A strict rule requiring a constantly balanced actual budget would: |
| | A) | increase the effectiveness of built-in stabilizers |
| | B) | be impossible with a progressive tax system |
| | C) | produce a standardized budget surplus when the economy is producing beyond its potential GDP |
| | D) | produce a standardized budget surplus when the economy is in a recession |
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| 7 | |
Which of the following exemplifies the crowding-out effect? An increase in government spending: |
| | A) | is financed by increasing the money supply, reducing interest rates and causing net exports to fall |
| | B) | is financed by borrowing, raising interest rates and causing private investment to fall |
| | C) | causes taxes to rise automatically, reducing consumption spending |
| | D) | causes the price level to rise, reducing net exports |
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| 8 | |
A very high level of U.S. public debt to GDP: |
| | A) | may bankrupt the U.S. |
| | B) | cannot bankrupt the U.S. because of its ability to tax and to refinance its debt |
| | C) | is, by itself, evidence of the burden of the debt on future generations |
| | D) | will offset any attempts at expansionary fiscal policy |
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| 9 | |
Built-in stabilizers arise from the fact that tax revenues vary directly with GDP. |
| | A) | True |
| | B) | False |
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| 10 | |
Answer the next question on the basis of the following diagram.
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Refer to the diagram. A contractionary fiscal policy is best represented by graph: |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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