If the economy were in a recession and even if the government did not make fiscal policy changes, we would expect government expenditure to be: high and tax revenues to be high, probably leading to a budget deficit. high and tax revenues to be low, probably leading to a budget deficit. O low and tax revenues to be low, probably leading to a budget surplus. O high and tax revenues to be low, probably leading to a budget surplus. QUESTION 2 Which of the following is considered expansionary fiscal policy? The government decreases the income tax rate. The government increases defense spending due to national security concerns. The government increases education subsidies for disadvantaged children to reduce inequality. A state (not federal) government cuts highway spending to balance its budget.13. The crowding-out effect suggests that: a. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. b. increases in government spending financed through borrowing raise the interest rate and reduce private investment. c. the American dollar replaces other currencies in transactions around the world. d. consumer and investment spending always vary inversely. 14. Expansionary fiscal policy is so named because it: a) expands beyond national borders b) necessarily expands the size of government and simultaneously the nation's money supply. c) is aimed at achieving greater price stability. dj is aimed at increasing aggregate demand and thus expanding real GDP. 15. A budget deficit means that: a- Federal government assets are less than liabilities. government expenditures are falling and revenues are rising. government revenues are greater than expenditures in a given year. government expenditures are greater than revenues in a given year. 16. Discretionary fiscal policy will stabilize the economy most when: a. deficits are incurred during inflations and surpluses during recessions. c. budget is balanced each year. b. deficits are incurred during recessions and surpluses during inflations. d. budget surpluses are always incurred. 17. Rising budget deficit signals that the government is engaging in a(n) fiscal policy: a. balanced budget b. contractionary C. expansionary d. unreasonable 18. A tax whose average rate increases as the amount taxed increases is: A. progressive b. aggressive C. congressive d. regressive c. depressive 19. One of the potential problems with the public debt is that it may: a. make income distribution more equitable. c. lead to higher taxes in the future. b. increase the debt burden of foreign creditors. d. decrease interest rates. 20. One reason the public debt will not bankrupt the Federal government is that the: a. debt can be refinanced by selling new bonds. c. foreigners bear the cost of the debt b. cost is shifted to future generations who would not care. d. debt has a positive effect on the economy. 21. Which combination of factors would most likely increase aggregate demand in the U.S.? A) an increase in consumer wealth and a decrease in interest rates B) an increase in income taxes and a decrease in foreign demand for U.S. products an increase in personal taxes and a decrease in government spending an increase in business taxes and a decrease in profit expectations 12. When the US economy is in recession, which of the fiscal policies would be government adopt? reduction in food subsidies and/or veterans' benefits and or an increase in corporate tax b. high import tariffs to stop exporting jobs to lower wage countries c. reduction in Federal tax rates on personal income and or an increase in government spending d. an increase in sales taxes and or a postponement of a highway construction program 23. The Federal Reserve System's four monetary policy goals are A) low government budget deficits, low current account deficits, high employment, and a strong dollar. B) low rate of bank failures, high reserve ratios, price stability, and coonomic growth. C) price stability, high employment, economic growth, and stability of financial markets and institutions. D) price stability, low government budget deficits, low current account deficits, and low rate of bank failures. 24. A checkable deposit at a commercial bank is atn); n. liability to the depositor and an asset to the bank. b. liability to both the depositor and the bank, c. ussel to the depositor and a liability to the bank. d. asset to both the depositor and the bank.An economist who favors smaller government would recommend: A tax cuts during recession and reductions in government spending during inflation. B. tax increases during recession and tax cuts during inflation C. tax cuts during recession and tax increases during inflation. D. increases in government spending during recession and tax increases during inflation. QUESTION 42 If the reserve requirement ratio is 10% and a deposit of $50,000 is made, then the excess amount is: A $5,000 O B. $10,000 C. $45,000 D. $50.000 QUESTION 43 State and local governments face constitutional or legal requirements to: A have a budget surplus. B. have a budget deficit @ C. have a balanced budget QUESTION 44 The value of the monetary multiplier is: A 1/MPS B. W/excess reserves C. 1/MPC @ D. 1/reserve requirement ratio