Title: Fiscal Policies
Course: TEST Course

Q: Which of the following is an example of an automatic fiscal policy stabilizer?
- Tax revenues rise after Congress raises corporate tax rates.
- Congress decides to cut spending on national defense.
- Congress cuts individual income tax rates.
- Tax revenues fall as real GDP decreases.
A: Tax revenues fall as real GDP decreases.

Q: Of the following examples, which is an example of an automatic fiscal policy stabilizer?
- Tax revenues fall after Congress decreases corporate tax rates.
- Congress decides to cut spending on national parks.
- Congress increases individual income tax rates.
- Tax revenues increase as real GDP increases.
A: Tax revenues increase as real GDP increases.

Q: ________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional changes in legislation.
- Standardized employment budgets
- Discretionary fiscal policies
- Budget expenditures
- Automatic stabilizers
A: Automatic stabilizers

Q: ________ are a form of tax and spending rules that can affect aggregate demand in the economy without any changes in legislation.
- A new spending bill passed by Congress
- A new law mandating higher payroll taxes
- Automatic stabilizers
A: Automatic stabilizers

Q: If an economy moves into a recession, causing that country to produce less than potential GDP, then:
- automatic stabilizers will cause tax revenue to increase and government spending to decrease.
- tax revenue and government spending will be higher because of automatic stabilizers.
- tax revenue and government spending will be lower because of automatic stabilizers.
- automatic stabilizers will cause tax revenue to decrease and government spending to increase.
A: automatic stabilizers will cause tax revenue to decrease and government spending to increase.

Q: If an economy moves into an inflationary period, causing that country to produce more than potential GDP, then
- automatic stabilizers will cause tax revenue to decrease and government spending to increase.
- tax revenue and government spending will be higher because of automatic stabilizers.
- tax revenue and government spending will be lower because of automatic stabilizers.
- automatic stabilizers will cause tax revenue to increase and government spending to decrease.
A: automatic stabilizers will cause tax revenue to increase and government spending to decrease.

Q: If an economy moves into a recessionary period, examples of fiscal policies that act as automatic stabilizers include
- an increase in tax revenues as household incomes fall.
- a flat tax on households’ income.
- an increase in government defense spending.
- an increase in transfer spending, such as unemployment benefits.
A: an increase in transfer spending, such as unemployment benefits.

Q: If an economy moves into an inflationary period, examples of fiscal policies that act as automatic stabilizers include
- an decrease in tax revenues as household incomes fall.
- a flat tax on households’ income.
- an increase in government defense spending.
- an decrease in transfer spending, such as unemployment benefits.
A: an decrease in transfer spending, such as unemployment benefits.

Q: During a recession, automatic stabilizers include
- income tax rates.
- Social Security payments.
- unemployment benefits.
A: unemployment benefits.

Q: Automatic stabilizers during a recession include
- property tax rates.
- Social Security payments.
- food stamps.
A: food stamps.

Q: If the economy is producing less than its potential GDP, ________ will show a smaller deficit than the actual deficit.
- discretionary fiscal policy
- the automatic stabilizers
- expansionary fiscal policy
- the standardized employment deficit
A: the standardized employment deficit

Q: If the economy is producing more than its potential GDP, ________ will show a larger deficit than the actual deficit.
- discretionary fiscal policy
- the automatic stabilizers
- expansionary fiscal policy
- the standardized employment deficit
A: the standardized employment deficit

Q: When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment deficit will show a ________ than the actual deficit.
- smaller surplus
- smaller deficit
- larger deficit
A: larger deficit

Q: When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit.
- smaller surplus
- larger deficit
- smaller deficit
A: smaller deficit

Q: In an attempt to boost the economy, the government's expansionary fiscal policy would include which of the following?
- increased taxation
- cutting government expenditure
- reducing the money supply
- cutting tax rates
A: cutting tax rates

Q: Expansionary fiscal policy might include which of the following?
- Increase in taxes or increased government spending.
- Reduction in taxes or lowered government spending.
- Reduction of taxes or increased government spending.
A: Reduction of taxes or increased government spending.

Q: An expansionary fiscal policy can increase the level of aggregate demand by all of the following EXCEPT
- cutting tax rates to increase disposable income and spending.
- reducing corporate tax rates to increase investment spending.
- decreasing government purchases.
A: decreasing government purchases.

Q: An expansionary fiscal policy can increase the level of aggregate demand by
- decreasing government purchases.
- reducing grants to state and local governments.
- reducing corporate tax rates to increase investment spending.
A: reducing corporate tax rates to increase investment spending.

Q: The government can use ________ in the form of ________ to increase the level of aggregate demand in the economy.
- a contractionary fiscal policy; a reduction in taxes
- an expansionary fiscal policy; an increase in corporate taxes
- an expansionary fiscal policy; an increase in government spending
A: an expansionary fiscal policy; an increase in government spending

Q: In order to increase the level of aggregate demand in the economy, the government can use ________ in the form of ________.
- a contractionary fiscal policy; an increase in taxes
- an expansionary fiscal policy; an increase in corporate taxes
- an expansionary fiscal policy; an increase in government spending
A: an expansionary fiscal policy; an increase in government spending

Q: If a government reduces tax rates in order to increase the level of aggregate demand, what type of fiscal policy is being used?
- contractionary and automatic
- automatic and expansionary
- discretionary and expansionary
A: discretionary and expansionary

Q: The goal of the government of Swansia last year was to increase the level of aggregate demand by reducing tax rates. What fiscal policy type did Swansia use?
- contractionary and automatic
- automatic and expansionary
- discretionary and expansionary
A: discretionary and expansionary

Q: Which of the following is NOT an example of an expansionary, discretionary fiscal policy?
- an increase in government purchases
- a reduction in tax rates.
- an increase in transfer payments.
- an increase in tax rates.
A: an increase in tax rates.

Q: Of the following examples, which one is excluded from being an expansionary, discretionary fiscal policy?
- an increase in government purchases
- a reduction in tax rates.
- an increase in transfer payments.
- an increase in tax rates.
A: an increase in tax rates.

Q: If the government of the country of LiLand want to promote economic activity and increase Aggregate Demand, it should
- cut funding to government agencies to reduce the budget deficit.
- increase taxes on imported products and gasoline.
- pass a new spending bill to fund new infrastructure projects.
A: pass a new spending bill to fund new infrastructure projects.

Q: The country of Latinivia has a goal to increase and foster economic activity and therefore increase Aggregate Demand. What actions would it take to achieve this goal?
- Cut funding to government departments to minimize the budget deficit.
- Increase taxes on imported services and oil.
- Fund new infrastructure projects by passing a new spending bill.
A: Fund new infrastructure projects by passing a new spending bill.

Q: When inflation begins to climb to unacceptable levels in the economy, the government should
- use contractionary fiscal policy to shift aggregate demand to the right.
- use expansionary fiscal policy to shift aggregate demand to the right.
- use expansionary fiscal policy to shift aggregate demand to the left.
- use contractionary fiscal policy to shift aggregate demand to the left.
A: use contractionary fiscal policy to shift aggregate demand to the left.

Q: A country’s government should ________ when inflation begins to climb to unacceptable levels in the economy.
- shift aggregate demand to the right by using contractionary fiscal policy
- shift aggregate demand to the right by using expansionary fiscal policy
- shift aggregate demand to the left by using expansionary fiscal policy
- shift aggregate demand to the left by using contractionary fiscal policy
A: shift aggregate demand to the left by using contractionary fiscal policy

Q: A typical ________ fiscal policy allows government to decrease the level of aggregate demand, through increases in tax rates.
- discretionary and expansionary
- contractionary and automatic
- discretionary and contractionary
A: discretionary and contractionary

Q: When the government passes a new law that explicitly increases overall tax rates and reduces spending levels, it is enacting:
- discretionary and expansionary
- contractionary and automatic
- discretionary and contractionary
A: discretionary and contractionary

Q: A decrease in government expenditure shifts the AD curve to the ________ and a decrease in taxes shifts the AD curve to the ________.
- right; left
- right; right
- left; left
- left; right
A: left; right

Q: A decrease in taxes will shift the AD curve to the ________, while a decrease in government expenditure will shift the curve to the ________.
- right; right
- left; right
- left; left
- right; left
A: right; left

Q: Contractionary fiscal policy is recommended when
- a recession has taken place.
- unemployment is on the rise.
- inflation has reached harmful levels.
A: inflation has reached harmful levels.

Q: When ________ contractionary fiscal policy is the recommended choice.
- a recession has taken place
- unemployment is on the rise
- inflation has reached harmful levels
A: inflation has reached harmful levels

Q: An increase in taxes through a new budget would
- shift the aggregate demand left and increase the Gross Domestic Product at the new equilibrium.
- shift the aggregate demand right as it rises and reduce the Gross Domestic Product at the new equilibrium.
- shift the aggregate demand left and reduce the Gross Domestic Product at the new equilibrium.
A: shift the aggregate demand left and reduce the Gross Domestic Product at the new equilibrium.

Q: If Congress passed a new budget that increased taxes it would
- increase the gross domestic product to a new equilibrium as aggregate demand shifted to the left
- reduce the gross domestic product to a new equilibrium as it rises and the aggregate demand shifts to the right.
- reduce the gross domestic product to a new equilibrium as aggregate demand shifted to the left.
A: reduce the gross domestic product to a new equilibrium as aggregate demand shifted to the left.