Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 16 Fiscal Policy
16.1 The Federal Budget
1) The federal budget is deined as
A) a monthly statement of expenditure laws passed by the U.S. government.
B) a monthly statement of whether the U.S. government is in deicit or surplus.
C) an annual statement of U.S. government violations of international laws.
D) an annual statement of expenditures and tax revenues of the U.S. government.
E) an annual statement of what policy actions the U.S. government has pursued.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
2) The use of the federal budget to achieve macroeconomic objectives of full employment
and sustainable economic growth is
A) called iscal policy.
B) called monetary policy.
C) done only when there is a budget surplus.
D) called government GDP policy.
E) done only when there is a budget deicit.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
3) In the United States for the year 2012, the federal government had a ________ so the
national debt was ________.
A) budget deicit; increasing
B) balanced budget; not changing
C) budget surplus; decreasing
D) budget deicit; decreasing
E) budget surplus; increasing
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
1
4) The last U.S. president to be in oice when the government had a budget surplus was
A) George H. Bush.
B) George W. Bush.
C) Ronald Reagan.
D) Dwight D. Eisenhower.
E) Bill Clinton.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
5) If the federal government has a budget surplus, then it is deinitely the case that
A) tax revenues exceeds government outlays.
B) tax revenues and government outlays are equal.
C) tax revenues are falling and government outlays are rising.
D) government outlays exceed tax revenues.
E) tax revenues are rising and government outlays are falling.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
6) The government has a budget surplus if
A) there is no national debt.
B) tax revenues are greater than outlays.
C) government outlays are greater than tax revenues.
D) the budget is balanced.
E) a iscal stimulus is being used to combat a recession.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
2
7) When tax revenues exceed the government’s outlays, the budget
A) has a deicit and the national debt is increasing.
B) is balanced and the national debt is decreasing.
C) has a surplus and the national debt is decreasing.
D) has a surplus and the national debt is increasing.
E) None of the above because by law tax revenue cannot exceed the government’s
expenditures.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
8) When tax revenues ________ outlays is positive, then the government has a budget
________.
A) minus; surplus
B) divided by; surplus
C) minus; deicit
D) plus; deicit
E) plus; surplus
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
9) When the government’s expenditures exceed its tax revenues, the budget
A) has a deicit and the national debt is increasing.
B) is balanced and the national debt is increasing.
C) has a surplus and the national debt is increasing.
D) has a deicit and the national debt is decreasing.
E) None of the above because by law the government’s expenditures cannot exceed its tax
revenue.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
3
10) When government outlays exceed tax revenues, the situation is called a budget
A) with a negative balance.
B) deicit.
C) surplus.
D) debt.
E) with no balance.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
11) When tax revenues ________ outlays is negative, then the government has a budget
________.
A) minus; surplus
B) divided by; surplus
C) minus; deicit
D) plus; deicit
E) plus; surplus
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
12) When tax revenues equal government outlays, the situation is referred to as
A) a balanced budget.
B) an equivalent budget.
C) an equal budget.
D) an equilibrium budget.
E) a legal budget.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
4
13) When the government’s outlays equal its tax revenues, then the budget
A) is in deicit.
B) is in surplus.
C) is balanced.
D) could be either in surplus or deicit.
E) is legal only because expenditures equal tax revenues.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
14) When tax revenues minus outlays is
i. positive, the government has a budget surplus.
ii. negative, the government has a budget deicit.
iii. zero, the government has a balanced budget.
A) i, ii, and iii
B) i and ii only
C) ii and iii only
D) i only
E) iii only
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
15) The government collects tax revenues of $100 million and has $105 million in outlays.
The budget balance is a
A) surplus of $5 million.
B) deicit of $5 million.
C) surplus of $105 million.
D) deicit of $105 million.
E) surplus of $100 million and a deicit of $105 million.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
5
16) The government collects tax revenues of $100 million and has $105 million in outlays.
The budget balance is a
A) surplus of $5 million.
B) deicit of $5 million.
C) surplus of $105 million.
D) deicit of $105 million.
E) surplus of $100 million and a deicit of $105 million.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
17) In 2010, the U.S. government had tax revenues of $2,703 billion and outlays were
$3,973 billion. The budget
A) surplus was $1,270 billion.
B) deicit was $1,270 billion.
C) surplus was $2,703 billion.
D) deicit was $3,973 billion.
E) was balanced because every dollar the government spends it must raise.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
6
The table above gives a nation’s government outlays and tax revenues for 2008 through
2012.
18) During which years did the country have a budget surplus?
A) 2008 and 2009
B) 2012 only
C) 2011 only
D) 2010 and 2012
E) all except 2011
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
19) During which years did the country have a budget deicit?
A) 2008 and 2009
B) 2012 only
C) 2011 only
D) 2010 and 2012
E) all except 2011
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
7
20) During which years did the country have a balanced budget?
A) 2008 and 2009
B) 2012 only
C) 2011 only
D) 2010 and 2012
E) all except 2011
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
21) The above table gives the government outlays and tax revenues from 2008 through
2012 for two countries. In 2011 country A had a ________ and country B had a ________.
A) budget deicit; budget deicit
B) balanced budge; budget surplus
C) balanced budget; budget deicit
D) budget surplus; budget surplus
E) budget surplus; balanced budget
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
8
22) The above table gives the government outlays and tax revenues from 2008 through
2012 for two countries. In 2010 country A had a ________ and country B had a ________.
A) budget deicit; budget deicit
B) budget deicit; budget surplus
C) balanced budget; budget deicit
D) budget surplus; budget surplus
E) budget surplus; budget deicit
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Analytical thinking
23) The national debt is the amount
A) by which government tax revenue exceed outlays in a given year.
B) of debt outstanding that arises from past budget deicits.
C) by which government outlays exceed tax revenue in a given year.
D) of government outlays summed over time.
E) of all future entitlement spending.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
24) The national debt is
A) tax revenue minus government outlays.
B) government outlays minus tax revenue.
C) the amount borrowed by the government to inance past budget deicits.
D) the amount lent by the government of past budget surpluses.
E) the excess of this year’s budget surplus minus this year’s budget deicit.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
9
25) When the government’s outlays equal its tax revenue, the budget
A) has a deicit and the national debt is increasing.
B) is balanced and the national debt is not changing.
C) has a surplus and the national debt is increasing.
D) has a deicit and the national debt is decreasing.
E) has a surplus and the national debt is decreasing.
Skill: Level 1: Deinition
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
26) When the government’s outlays exceed its tax revenues, the national debt
A) shrinks thanks to the budget surplus.
B) grows to inance the budget deicit.
C) shrinks thanks to the budget deicit.
D) grows to inance the budget surplus.
E) does not change because it has nothing to do with government outlays and tax revenue.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
27) The national debt can only be reduced if
A) the federal budget is in deicit.
B) the federal budget is in surplus.
C) there are no tax multiplier efects.
D) the economy has a delationary gap.
E) the economy has an inlationary gap.
Skill: Level 2: Using deinitions
Section: Checkpoint 16.1
Status: Old
AACSB: Relective thinking
10