Quiz Chapters 12 & 13 In Tutorial Library

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TITLE: Quiz Chapters 12 & 13

CLASS / COURSE: BA 206

QUESTION DESCRIPTION:

BA 206 Quiz Chapters 12 & 13 

1.

When automatic stabilizers are the cause of higher deficits, we would expect to observe that

A) the economy has been contracting
B) the economy has been growing
C) interest rates must be rising
D) interest rates must be falling
E) net exports have been decreasing
 

2.

Federal outlays include:

A) Government purchases and taxes
B) Government purchases and transfer payments
C) Taxes and transfer payments
D) Government purchases and net taxes
E) Spending on national defense and taxes
 

3.

A federal budget surplus occurs when

A) there is deflation
B) federal government net taxes exceed purchases
C) there is inflation
D) aggregate demand is greater than aggregate supply
E) aggregate supply is greater than aggregate demand
 

4.

Which component of aggregate expenditure is most subject to crowding out?

A) consumption expenditures
B) investment spending
C) U.S. imports
D) government purchases of goods and services
E) saving
 

5.

Which component of aggregate expenditure is affected when net taxes are cut?

A) net exports; they increase
B) government purchases; they fall
C) government purchases; they rise
D) consumption; it falls
E) consumption; it rises
 

6.

Fiscal policy

A) uses the federal government's powers of spending and taxation to affect employment, the price level, and GDP
B) uses the federal government's powers over the money supply and interest rates to affect employment, the price level, and GDP
C) can affect employment and prices, but not the level of GDP
D) can affect employment and the level of GDP, but not the price level
E) is most effective when employed by state governments rather than by the federal government
 

7.

Which institution was created under the Employment Act of 1946 to assist the President in formulating an appropriate fiscal policy?

A) the Council of Economic Advisers
B) the Board of Governors of the Fed
C) the Office of Management and Budget
D) the Fed's Open Market Committee
E) the Department of Commerce
 

8.

In which of the following ways does government affect the consumption component of planned aggregate expenditures?

A) through net taxes, which change disposable income
B) by purchasing goods and services, which increase consumption
C) by using subsidies to encourage firms to invest
D) by using net taxes to encourage firms to invest
E) by producing public goods
 

9.

To close an expansionary gap using fiscal policy, the government can

A) increase government spending
B) increase government spending and decrease taxes at the same time
C) decrease taxes
D) decrease government spending or increase taxes
E) decrease government spending by the size of the gap

10.

Keynesian theory and policies were developed to show why

A) prolonged periods of unemployment were impossible
B) prolonged periods of inflation were impossible
C) unemployment could persist for long periods
D) the interest rate ensures that saving equals investment
E) flexible prices and wages ensure that a modern economy will enjoy prolonged periods of low unemployment and low inflation
 

11.

Of the following fiscal programs, which has the biggest effect, per dollar, on aggregate demand?

A) unemployment compensation during depressions
B) unemployment compensation during near-full employment
C) Aid to Families with Dependent Children
D) the space shuttle program
E) milk subsidies
 

12.

When spending by the federal government exceeds net taxes,

A) the price level tends to rise
B) the money supply must fall
C) the aggregate demand curve shifts leftward
D) aggregate supply moves leftward
E) there is a federal budget surplus
 

13.

The federal budget deficit becomes __________ during recessions because __________.

A) smaller; transfer payments increase and tax revenues decline
B) larger; transfer payments increase and tax revenues decline
C) larger; both transfer payments and tax revenues increase
D) smaller; both transfer payments and tax revenues increase
E) smaller; both transfer payments and tax revenues decrease
 

14.

Approximately what proportion of the U.S. federal budget was spent on national defense in 2004?

A) 10 percent
B) 20 percent
C) 40 percent
D) 50 percent
E) 60 percent
 

15.

If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million, we would expect the net effect to be

A) an increase in the budget deficit and in transfer payments
B) an increase in the budget deficit and in net taxes
C) an increase in the budget deficit and in government spending
D) no change in the budget deficit because there is no net change in government spending
E) no change in the budget deficit because neither defense spending nor the Department of Justice is included in government spending
 

16.

Which of the following would decrease the size of a federal budget deficit?

A) a recession
B) an increase in defense spending
C) growth in real GDP
D) a decrease in taxes
E) an increase in transfer payments
 

17.

John Maynard Keynes influenced the use of fiscal policy in the U.S. by arguing effectively that

A) balancing the national budget at all times was sound economic policy
B) natural economic forces were not necessarily adequate to move the economy toward its potential output level
C) the government did not need to stimulate output in order for the economy to achieve its potential output level
D) increases in taxes and increases in government purchases are equally effective in closing an expansionary gap
E) increases in taxes and increases in government purchases are equally effective in closing a contractionary gap
 

18.

Which of the following best describes the philosophy of functional finance?

A) The federal budget should be balanced each year.
B) A federal budget deficit should be permitted only during a business expansion.
C) A federal budget deficit should be permitted only during a recession.
D) Policy makers should focus on keeping the unemployment rate at the natural rate, even if this means budget deficits.
E) Policy makers should be less concerned about budget deficits and more concerned with increasing the natural rate of unemployment

 

19.

If the government increases its purchases by $100 and the multiplier is 4, then equilibrium real GDP demanded

A) increases by $25
B) decreases by $25
C) increases by $100
D) increases by $400
E) decreases by $400
 

20.

According to the functional finance budget philosophy,

A) deficits should never be used to stimulate the economy
B) automatic stabilizers should be eliminated
C) the government budget should be whatever is necessary to have the economy operate at potential GDP
D) each government spending program should be financed on the basis of its function
E) the federal budget should be balanced in the long run
 

 

 

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SUBJECTS / CATEGORIES:
1. Finance
2. Financial Management
3. Accounting
4. Corporate Finance
5. Investment and Portfolio Management
6. Business Economics
7. Economics
8. Microeconomics
9. Macroeconomics

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