Which of the following actions will increase budget deficits and also the national debt?

Question 16 options:

	real interest rate decreases
	tax decreases
	transfer payment decreases
	money supply decreases
	government spending decreases

Do most economists believe that the federal budget should be balanced each fiscal year?

Question 17 options:

	Yes, as the law states that both the federal and state budgets should always be balanced.
	Yes, since the balanced budget multiplier is larger so it makes the economy grow faster.
	No, because it can be in a deficit during recession and offset by surpluses when the economy is doing well.
	Yes, a budget should be balanced annually; otherwise, persistent budget deficits can cause havoc in the economy.

Which of the following is not determined in the aggregate demand (AD) and aggregate supply (AS) model?

Question 18 options:

	recessionary or inflationary gaps
	real interest rates
	real GDP
	the price level
	output/income/employment

The accompanying diagram shows a hypothetical, short-run equilibrium in an economy. Appropriate fiscal or monetary policy in this situation would be:

Question 19 options:

	an increase in investment.
	an increase in government spending.
	an increase in the money supply.
	an increase in tax rates.
	an increase in transfer payments

If a bank has demand deposits of $10,000 and (actual) reserves of $5,000 and if the reserve requirement is 10%, its excess reserves are $3,000.

Question 20 options:

	True
	False

If wages and prices are perfectly flexible, a decrease in aggregate demand will cause a(n) ________ in the price level and ________ in unemployment.

Question 21 options:

	decrease; a decrease
	increase; no change
	increase; an increase
	decrease; no change

Which of the following policies is currently being used by the Biden administration?

Question 22 options:

	restrictive fiscal policies
	increasing government spending and transfers
	the reduction of the reserve requirement to zero percent
	lowering tax rates for corporations and wealthy individuals
	the purchase of short-term and long-term government bonds

Macroeconomic policy activism:

Question 23 options:

	is what is meant by automatic stabilizers.
	is the use of monetary and fiscal policy to smooth out business cycles.
	is the primary theory of classical economists.
	advocates that all of the people in a democracy should decide what type of economic policy is appropriate.
	gives the Federal Reserve the sole responsibility for economic policy.

Say's Law refers to the idea that:

Question 24 options:

	unemployment and inflation are inversely related.
	demand and supply are totally independent.
	supply creates its own supply.
	the act of production creates an equivalent level of demand.
	demand creates its own supply.

Suppose you are a member of Congress when the economy is in a recessionary gap. If your goal is to achieve a fully-employed labor force, you should vote to:

Question 25 options:

	decrease the amount of bonds in circulation.
	decrease government purchases, transfers, and also taxes.
	raise taxes by the amount of (government spending + transfers)
	raise government purchases, raise transfer payments, and/or lower taxes.
	balance the federal budget.

In the short run, wages and some prices are considered to be:

Question 26 options:

	sticky and/or inflexible.
	extremely flexible.
	irrelevant.
	unpredictable.

A decrease in energy prices will:

Question 27 options:

	decrease aggregate demand.
	cause inflation.
	decrease the quantity of aggregate output supplied in the short-run.
	increase short-run aggregate supply.

A negative demand shock can cause:

Question 28 options:

	a recessionary gap.
	a supply shock.
	inflation.
	crowding-out.
	a liquidity trap.

Automatic stabilizers act like:

Question 29 options:

a)	automatic expansionary fiscal policy when the economy in in inflation.

b)	automatic expansionary fiscal policy when the economy in in recession.

c)	automatic contractionary policy when the economy is in recession.

d)	an additional multiplier effect.

Suppose the budget deficit of a country remains the same each year for 5 years. The national debt will:

Question 30 options:

	remain constant.
	fall.
	rise.
	either rise or fall, depending on the size of the deficit.
	either remain constant or fall.