Chapter 13 – Fiscal Policy, Deficits, and Debt
55. If the cyclically-adjusted budget shows a deficit of about $100 billion and the actual
budget shows a deficit of about $150 billion, it can be concluded that there is:
56. In Year 1, the actual budget deficit was $200 billion and the cyclically-adjusted deficit
was $150 billion. In Year 2, the actual budget deficit was $225 billion and the cyclically–
adjusted deficit was $175 billion. It can be concluded that fiscal policy from Year 1 to Year 2
became more:
57. In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit
was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-
adjusted deficit was $125 billion. It can be concluded that discretionary fiscal policy from
Year 1 to Year 2 was:
Chapter 13 – Fiscal Policy, Deficits, and Debt
58. In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit
was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-
adjusted deficit was $125 billion. It can be concluded that from Year 1 to Year 2:
59. The cyclically-adjusted deficit as a percentage of GDP is 2 percent in Year 1. This deficit
becomes 1 percent of GDP in Year 2. It can be concluded from Year 1 to Year 2 that:
60. 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 from Year 1 to
Year 2 that:
Chapter 13 – Fiscal Policy, Deficits, and Debt
61. If you are told that the government had an actual budget deficit of $50 billion, then you
would:
62. Assume that the economy is in a recession and there is a budget deficit. A strict balanced–
budget amendment that would require the Federal government to balance its budget during a
recession would be:
Chapter 13 – Fiscal Policy, Deficits, and Debt
13–24
63. The table below shows the cyclically-adjusted budget deficit as a percentage of GDP over
a five-year period.
Refer to the above information. In which year was fiscal policy turning more expansionary?
Chapter 13 – Fiscal Policy, Deficits, and Debt
64. Refer to the above data. Which of the following is true about cyclically-adjusted deficits?
65. Refer to the above data. The direction of fiscal policy did not change from:
66. Refer to the above data. The direction of fiscal policy became more expansionary from:
Chapter 13 – Fiscal Policy, Deficits, and Debt
13–26
67. Refer to the above data. The direction of fiscal policy became more contractionary from:
68. Without a change in discretionary fiscal policy, we would expect that if the economy goes
into recession, then the:
69. The cyclically-adjusted surplus in the U.S. was +1.1% of GDP in 2000 and +0.5% of GDP
in 2001. This suggests that the government during that period:
Chapter 13 – Fiscal Policy, Deficits, and Debt
70. The bursting of the Dot.com bubble in 2000, along with the terrorist attacks in 2001, made
the U.S. government:
71. The last year when there was a surplus in the actual U.S. Federal budget was in:
72. The Great Recession that started in 2007 and the consequent policy response made the:
73. The American Recovery and Reinvestment Act of 2009 is a clear example of:
74. The American Recovery and Reinvestment Act of 2009 included mostly:
75. One timing problem with fiscal policy to counter a recession is a “recognition lag” that
occurs between the:
Chapter 13 – Fiscal Policy, Deficits, and Debt
76. One timing problem with fiscal policy to counter a recession is an “operational lag” that
occurs between the:
77. One timing problem with fiscal policy to counter a recession is an “administrative lag”
that occurs between the:
78. The time which elapses between the beginning of a recession or an inflationary episode
and the identification of the macroeconomic problem is referred to as a(n):
Chapter 13 – Fiscal Policy, Deficits, and Debt
79. The lag between the time the need for fiscal action is recognized and the time action is
taken is referred to as the:
80. Proponents of the notion of a “political business cycle” suggest that:
81. During a recession, fiscal policy is typically:
Chapter 13 – Fiscal Policy, Deficits, and Debt
82. State and local governments are limited in their ability to respond to recessions because
of:
83. 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:
84. If people expected that a tax cut was temporary, then this fiscal policy’s effect on the
economy will tend to be:
Chapter 13 – Fiscal Policy, Deficits, and Debt
85. The crowding-out effect suggests that:
86. The crowding-out effect arises when:
87. The crowding-out effect works through interest rates to:
Chapter 13 – Fiscal Policy, Deficits, and Debt
88. 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 would:
89. The crowding-out effect tends to be stronger when the economy:
90. If the crowding-out effect is at its maximum strength, it follows that an increase in
government spending would:
Chapter 13 – Fiscal Policy, Deficits, and Debt
91. Assume that if there was 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:
92. Assume that if there was 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:
93. Most economists believe that fiscal policy is:
Chapter 13 – Fiscal Policy, Deficits, and Debt
94. There is general agreement among economists that a proposed fiscal policy should be
evaluated for its:
95. A change in aggregate demand due to an increase in transfer payments is equivalent in the
aggregate expenditure model to:
96. Assume the economy is at full employment but planned investment exceeds saving. Other
things being equal, what fiscal policy actions would best address this problem?
Chapter 13 – Fiscal Policy, Deficits, and Debt
97. The effect of an increase in the government budget deficit on the equilibrium level of
GDP is essentially the same as a(n):
98. A Federal budget deficit exists when:
99. The Federal budget deficit is calculated each year by:
Chapter 13 – Fiscal Policy, Deficits, and Debt
100. The public debt is the:
101. How is the public debt calculated?
102. A budget surplus means that:
Chapter 13 – Fiscal Policy, Deficits, and Debt
103. A Federal budget deficit is financed by the:
The following is budget information for a hypothetical economy. All data are in billions of
dollars.
104. Refer to the above data. In which year is there a budget surplus?
Chapter 13 – Fiscal Policy, Deficits, and Debt
105. Refer to the above data. The budget deficit was $75 billion in:
107. Refer to the above data. Assume that Year 1 is the first year for this economy and Year 5
is the current year. What is the public debt in this economy at Year 5?
Chapter 13 – Fiscal Policy, Deficits, and Debt
108. As of 2009, most of the U.S. Federal debt was owed to:
109. In 2009, the general public (excluding Federal agencies) held about how many percent of
U.S. Federal debt?
110. Foreigners held roughly how many percent of U.S. Federal debt in 2009?