The government has a budget deficit if:

Select one:

a.

its total revenues are equal to its total expenditures.

b.

its total revenues are less than its total expenditures.

c.

its total revenues are greater than its total expenditures.

d.

the money supply is less than total expenditures.

Suppose a country's debt rises by 6% and its GDP rises by 8%. What happens to the debt-GDP ratio?

Select one:

a.

It rises if there is a budget deficit that period.

b.

It falls.

c.

It rises.

d.

There is insufficient information to answer the question.

A transfer payment that rises automatically during a recession is:

Select one:

a.

interest payments on the national debt.

b.

unemployment compensation.

c.

Social Security payments to retired persons.

d.

government payments to war veterans.

Discretionary fiscal policy refers to:

Select one:

a.

deliberate government efforts to stabilize the economy through government spending and taxes.

b.

the use of automatic stabilizers and intervention policies to stabilize the economy.

c.

any government policy that requires a lag period of at least three months.

d.

the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy.

Suppose the economy experiences an inflationary gap. Policymakers who believe that government is too big would favor which of the following policies to close the gap?

Select one:

a.

reduction in government spending

b.

increases in income tax rates

c.

increases in corporate tax rates

d.

increases in interest rates

A recessionary gap can be closed with:

Select one:

a.

using a contractionary monetary policy.

b.

an increase in taxes.

c.

a decrease in government purchases.

d.

using an expansionary fiscal policy.

If there is an inflationary gap in the economy, discretionary fiscal policy would likely involve an action to:

Select one:

a.

shift the aggregate demand curve to the right.

b.

shift the aggregate demand curve to the left.

c.

shift both the aggregate demand curve and aggregate supply curve to the right.

d.

shift both the aggregate demand curve and aggregate supply curve to the left.

Which of the following statements is true?

Select one:

a.

Unlike monetary policy, fiscal policy is not subject to lags.

b.

Like monetary policy, fiscal policy is also subject to the same types of lags.

c.

In general, fiscal policy lags are much shorter than monetary policy lags.

d.

Although both monetary and fiscal policies are subject to lags, fiscal policy lags are easier to eliminate.

An expansionary fiscal policy is likely to result in the Treasury _______ bonds, the prices of bonds _______, and interest rates _______.

Select one:

a.

selling more; falling; falling

b.

buying more; rising; falling

c.

selling more; rising; rising

d.

selling more; falling; rising

In a study on the degree of crowding out of Canadian private investment as a result of government expenditures from 1961-2000, Professor Baotai Wang concluded that:

Select one:

a.

all types of government spending

b.

government expenditures that increased human capital, such as spending on health and education, are more likely to lead to crowding out than other types of government expenditures.

c.

crowding out depends on the nature of spending done by the government.

d.

government expenditures, on infrastructure and capital are more likely to lead to crowding in because they expand a nation's capital stock.