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33-141
A c c e s s i b i l i t y :
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254.
The cyclically adjusted deficit as a percentage of GDP is 2 percent in Year 1. This
cyclically adjusted deficit becomes 1 percent of GDP in Year 2. It can be
concluded that from
Year 1 to Year 2,
255.
The cyclically adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus
becomes a deficit of 2 percent of GDP in Year 2. It can be concluded that
from Year 1 to Year 2,
256.
If you were told that the government had an actual budget deficit of $50 billion, then you
33-142
would
257.
Assume that the economy is in a recession and there is a budget deficit. A strict balanced-
budget rule that would require the Federal government to balance its budget
during a recession
would be
258.
Year
Deficit it as a % of GDP
1
1.5%
2
1.4
3
2.0
4
1.8
5
1.5
The accompanying table shows the cyclically adjusted budget deficit as a percentage of GDP
over a five-year period. In which year was fiscal policy turning more
expansionary?
259.
Year
Actual Budget Deficit (-) or Surplus
(+)
Standardized Budget Deficit (-) or Surplus
(+)
1999
+1.4%
+0.1%
2000
+2.5
+1.1
2001
+1.3
+1.1
2002
-1.5
-1.1
2003
-3.4
-2.7
2004
-3.5
-2.4
2005
-2.6
-1.8
2006
-1.9
-1.8
2007
-1.3
-1.4
Refer to the data in the table. In which year was the cyclical deficit the largest?
33-144
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written consent of McGraw-Hill Education.
Di ffic ulty: 02 Medium
Learning Objective: 33-03 Describe how the cyclically adjusted budget reveals the status
of U.S. fiscal policy.
Test Bank: II
Topic:
Evaluating How Expansionary or Contractionary Fiscal Policy Is Determined
260.
Year
Actual Budget Deficit (-) or Surplus
(+)
Standardized Budget Deficit (-) or Surplus
(+)
1999
+1.4%
+0.1%
2000
+2.5
+1.1
2001
+1.3
+1.1
2002
-1.5
-1.1
2003
-3.4
-2.7
2004
-3.5
-2.4
2005
-2.6
-1.8
2006
-1.9
-1.8
2007
-1.3
-1.4
Refer to the data in the table. The direction of fiscal policy became more expansionary from
261.
Year
Actual Budget Deficit (-) or Surplus
(+)
Standardized Budget Deficit (-) or Surplus
(+)
1999
+1.4%
+0.1%
2000
+2.5
+1.1
2001
+1.3
+1.1
2002
-1.5
-1.1
2003
-3.4
-2.7
2004
-3.5
-2.4
2005
-2.6
-1.8
2006
-1.9
-1.8
2007
-1.3
-1.4
Refer to the data in the table. The direction of fiscal policy became more contractionary from
262.
Without a change in discretionary fiscal policy, we would expect that if the economy goes
into recession, then the
33-146
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written consent of McGraw-Hill Education.
percent of GDP in 2002. This suggests that the government during that
period
A. cut taxes and/or increased spending.
B.
increased taxes and/or cut spending.
C.
wanted to rein in inflation.
D.
did not change its discretionary fiscal policy.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Di ff icult y:
02 Medium
Learning Objective: 33-04 Summarize recent U.S. fiscal policy and the projections for
U.S. fiscal policy over the next few years.
Test Bank: II
Topic: Recent and Projected U.S. Fiscal Policy
264.
The bursting of the dot-com bubble in 2000, along with the terrorist attacks in 2001, made
the U.S. government
265.
The last year when there was a surplus in the actual U.S. Federal budget was in
33-147
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 33-04 Summarize recent U.S. fiscal policy and the projections for U.S.
fiscal policy over the next few years.
Test Bank: II
Topic:
Recent and Projected U.S. Fiscal Policy
266.
When the U.S. economy reached full employment in 2007, the cyclically adjusted deficit that
year was −1.3 percent of GDP. From this information, we know that
the
267.
The Great Recession of 2007–09 and the consequent policy response made the
268.
The American Recovery and Reinvestment Act of 2009 is a clear example of
33-148
269.
The American Recovery and Reinvestment Act of 2009 included mostly
270.
From 2010 to 2015, the actual as well as the cyclically adjusted federal budget deficits as
percentages of GDP in the U.S. have
271.
One timing problem in using fiscal policy to counter a recession is the "recognition lag" that
occurs between the
272.
One timing problem in using fiscal policy to counter a recession is the "operational lag" that
occurs between the
273.
One timing problem in using fiscal policy to counter a recession is the "administrative lag"
that occurs between the
33-150
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written consent of McGraw-Hill Education.
Di ffic ulty: 02 Medium
Learning Objective: 33-05 Discuss the problems that governments may encounter in
enacting and applying fiscal policy.
Test Bank: II
Topic:
Problems, Criticisms, and Complications of Implementing Fiscal Policy
274.
The time that elapses between the beginning of a recession or an inflationary episode and
the identification of the macroeconomic problem is referred to as a(n)
275.
The lag between the time that the need for fiscal action is recognized and the time action is
actually taken is referred to as the
276.
Proponents of the notion of a "political business cycle" suggest that
33-151
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written consent of McGraw-Hill Education.
B.
cyclical swings in the economy are produced by the inherent political instability found in
capitalist economies.
C. a possible cause of economic fluctuations is the use of fiscal policy by policymakers for
political purposes and goals.
D. there is constant political trading among policymakers that tends to make the economic
policies of state and local governments procyclical.
277.
State and local governments are limited in their ability to respond to recessions because of
278.
If there is a constitutional requirement to maintain a balanced budget, then during a
recession when tax revenues are shrinking, the government will have to
implement
33-152
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 33-05 Discuss the problems that governments may encounter in
enacting and applying fiscal policy.
Test Bank: II
Topic:
Problems, Criticisms, and Complications of Implementing Fiscal Policy
279.
A procyclical fiscal policy, like those of many state and local governments in the United
States, tends to
280.
If people expected that a fiscal policy in the form of a tax cut was temporary, then this
policy's effect on the economy would tend to be
281.
The crowding-out effect suggests that
33-153
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written consent of McGraw-Hill Education.
D. high taxes reduce both consumption and saving.
282.
The crowding-out effect arises when
283.
The crowding-out effect works through interest rates, and it tends to
284.
The United States is experiencing a recession and Congress decides to adopt an
expansionary fiscal policy to stimulate the economy. In this case, the crowding-out
effect
suggests that investment spending will
285.
The crowding-out effect tends to be stronger when the economy
286.
If the crowding-out effect is at its maximum strength, it follows that an increase in
government spending will
33-155
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di ff icult y:
02 Medium
Learning Objective: 33-05 Discuss the problems that governments may encounter in
enacting and applying fiscal policy.
Test Bank: II
Topic: Problems, Criticisms, and Complications of Implementing Fiscal Policy
287.
Assume that if there were no crowding out, an increase in government spending would
increase GDP by $100 billion. If there had been partial crowding out,
however, then GDP
would have
288.
Assume that if there were no crowding out, an increase in government spending would
increase GDP by $100 billion. On the other hand, if there had been full
crowding out, then GDP
would have
289.
Most economists believe that fiscal policy is
33-156
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written consent of McGraw-Hill Education.
A.
better than monetary policy for "fine-tuning" the economy.
B.
better than monetary policy for month-to-month stabilization.
C. not as good as monetary policy for month-to-month stabilization.
D. not very good at pushing the economy in a particular direction.
290.
There is general agreement among economists that a proposed fiscal policy should be
evaluated for its
291.
The effect of an increase in the government budget deficit on the equilibrium level of GDP is
essentially the same as a(n)
33-157
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written consent of McGraw-Hill Education.
enacting and applying fiscal policy.
Test Bank: II
Topic: Problems, Criticisms, and Complications of Implementing Fiscal Policy
292.
A Federal budget deficit exists when
293.
The public debt is the
294.
How is the public debt calculated?
33-158
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Di ffic ulty: 02 Medium
Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.
public debt.
Test Bank: II
Topic:
The U.S. Public Debt
295.
A budget surplus means that
296.
A Federal budget deficit is financed by the
297.
The total amount of debt owed by the Federal government is represented by the total value
of the outstanding
33-159
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written consent of McGraw-Hill Education.
A. U.S. government securities.
B.
Federal Reserve notes.
C.
bank loans and deposits.
D.
stocks and bonds.
298.
Government Spending
Tax Revenues
GDP
Year 1
$800
$825
$4,000
Year 2
850
850
4,200
Year 3
900
875
4,350
Year 4
950
900
4,500
Year 5
1,000
925
4,600
The table contains budget information for a hypothetical economy. All data are in billions of
dollars. In which year is there a budget surplus?
299.
Government Spending
Tax Revenues
GDP
Year 1
$800
$825
$4,000
Year 2
850
850
4,200
Year 3
900
875
4,350
Year 4
950
900
4,500
Year 5
1,000
925
4,600
The table contains budget information for a hypothetical economy. All data are in billions of
dollars. The budget deficit was $75 billion in
300.
Government Spending
Tax Revenues
GDP
Year 1
$800
$825
$4,000
Year 2
850
850
4,200
Year 3
900
875
4,350
Year 4
950
900
4,500
Year 5
1,000
925
4,600
The table contains budget information for a hypothetical economy. All data are in billions of
dollars. In which year is there a balanced budget?
