1. Which of the following is FALSE regarding deficits?

Group of answer choices

Deficits grow when outlays increase.

Deficits tend to grow during recessions.

Deficits grow when revenues increase.

Recent U.S. budget deficits are large in a historical context.

2. Which of the following is true?

Group of answer choices

The United States generally has a budget surplus.

National debt is the same as deficit.

The national debt is the sum of yearly budget deficits.

A deficit will occur when revenues exceed outlay

3. The marginal propensity to consume is the change in consumption expenditure divided by the change in disposable income.

Group of answer choices

True

False

4. Fiscal policy is usually used during recessions because it is takes less time to implement than monetary policy.

Group of answer choices

True

False

5. Monetary policy is:

Group of answer choices

more effective in the long run.

more effective in the short run.

equally effective in the long and short run.

No answer text provided.

6. The most commonly used tool of monetary policy by the Fed is open market operations.

Group of answer choices

True

False

7. If the money supply increases, and the price level is unchanged, interest rates will fall.

Group of answer choices

True

False

8. The demand for money will increase when the price level increases.

Group of answer choices

True

False

9. Suppose the Fed engages in contractionary monetary policy to reduce the money supply. What is the result in the loanable funds market?

Group of answer choices

There is a shift in the demand for loanable funds.

The amount of loanable funds increases.

Bank competition increases.

The interest rate rises.

10. Which of the following is an example of expansionary fiscal policy?

Group of answer choices

increase in taxes

stimulus package

increasing the money supply

lowering interest rates

11. Suppose the MPC is 0.9. What will the total GDP impact be of a $400 billion increase in government spending (G)?

Group of answer choices

$360 billion

$760 billion

$1 trillion

$4 trillion

12. Supply-side fiscal policy initiatives include the following items EXCEPT:

Group of answer choices

R&D tax credits

Education policies (subsidies or tax breaks)

Lower corporate profit tax rates

Open market operations

13. During a recession, incomes fall and unemployment rises.

Group of answer choices

True

False

14. Which of the following is part of mandatory outlays?

Group of answer choices

Social Security

defense spending

government employee salaries

infrastructure maintenance

15. People with higher incomes pay a larger portion of their income in taxes than people with lower incomes do. That's because of Progressive income tax system.

Group of answer choices

True

False

16. Government budget is a plan for both raising and spending funds for financial activities.

Group of answer choices

True

False

17. The two largest sources of government revenue are individual income taxes and social insurance.

Group of answer choices

True

False

18. Budget deficit occurs when revenue exceed government outlays in a given time period, usually a year.

Group of answer choices

True

False

19. When there is a budget deficit, the government has to borrow money to cover the gap.

Group of answer choices

True

False

20. Debt is budget deficits.

Group of answer choices

True

False

21. Consider just the AD curve. Suppose consumption (C) broadly increases across the entire economy. This will cause

Group of answer choices

a movement along the AD curve.

the AD curve to shift outward.

the slope of the AD curve to get steeper.

a decrease in the price level of the economy.

22. Why is the LRAS curve vertical?

Group of answer choices

The short run sets a given output that will remain in the long run.

Long-term output can only increase at a specific equilibrium price level.

Prices have nothing to do with long-term output.

Unemployment is zero in the long run.

23. With the AD-AS graph, what variable is on the vertical axis?

Group of answer choices

National income.

The price of the good we are studying.

The price of labor.

The price level

24. Suppose there is an increase in AD, causing a price level increase; what will happen in the long run as prices adjust?

Group of answer choices

The price level will go back to its previous level.

The price level will rise even further.

The price level will fall to a level below its previous level.

The price level will fall slightly to a level somewhere between its current level and the original level.

25. Aggregate Demand and Aggregate Supply Model built on demand and supply modelused to study business cycles.

Group of answer choices

True

False

26. If price levels rise, people will save less which will increase interest rates. This will decrease investment.

Group of answer choices

True

False

27. What will cause an increase in demand (rightward shift) for foreign currency?

Group of answer choices

An increase in demand for foreign goods.

An increase in the exchange rate.

A decrease in the exchange rate.

A decrease in the demand for U.S. products.

28. Suppose that the U.S. dollar appreciates compared to the Japanese yen. What will happen as a result?

Group of answer choices

The exchange rate of yens to dollars will not change.

It will take less yen to buy a U.S. dollar.

It will take more U.S. dollars to buy yen.

Japanese goods will become more attractive to American consumers.

29. If U.S. exports increase:

Group of answer choices

The current and capital account will no longer balance.

Current account deficits will shrink.

Current account deficits will increase.

The demand for loanable funds will decrease.