According to Congressional Budget Office projections made in March 2006, the Fed

eral budget is expected to remain in deficit until when?

The average tax rate required to service the public debt is roughly measured by:
Select one:
a. the absolute size of the debt.
b. the debt as a fraction of the GDP.
c. interest on the debt as a percentage of the GDP.
d. the ratio of government spending to the GDP.
The effectiveness of the built-in or automatic stabilizers is limited because:
Select one:
a. the stabilizers produce budget surpluses during recessions.
b. transfer payments and subsidies increase during inflation and decrease during
recessions.
c. the offset the stabilizers provide to a change in private spending is less th
an the change in private spending.
d. the stabilizers raise the general price level regardless of the phase of the
business cycle.
Which of the following represents the most expansionary fiscal policy?
Select one:
a. a $10 billion tax cut
b. a $10 billion increase in government spending
c. a $10 billion tax increase
d. a $10 billion decrease in government spending
Which one of the following might offset a crowding-out effect of financing a lar
ge public debt?
Select one:
a. a decline in net exports
b. an increase in public investment
c. a decrease in the money supply
d. a decline in public investment
The public debt is the accumulation of all deficits and surpluses that have occu
rred through time.
Select one:
True
False
If the full-employment GDP for the above economy is at L, the:
Select one:
a. actual budget will have a deficit.
b. standardized budget will have a deficit.
c. actual budget will have a surplus.
d. standardized budget will have a surplus.
The financing of a government deficit increases interest rates and, as a result,
reduces investment spending. This statement describes:
Select one:
a. the supply-side effects of fiscal policy.
b. built-in stability.
c. the crowding-out effect.
d. the net export effect.
Refer to the above table for a fictional economy. The changes in the budget cond
itions between 2000 and 2001 best reflect:
Select one:
a. demand-pull inflation.

b. cost-push inflation.
c. an expansion of real GDP and an automatic increase in tax revenues.
d. a contractionary fiscal policy.
Answer the next question(s) using the following budget information for a hypothe
tical economy. Assume that all budget surpluses are use to pay down the public d
ebt.
Picture
Refer to the above data. If year 1 is the first year of this nation's existence
and year 6 is the present year, this nation's public debt is:
Select one:
a. $275 billion.
b. $100 billion.
c. $3540 billion.
d. $230 billion.
Answer the next question(s) on the basis of the following before-tax consumption
schedule for a closed economy:
Picture
Refer to the above data. If a lump-sum tax (the same tax amount at each level of
GDP) of $40 is imposed in this economy, we can conclude that the tax:
Select one:
a. enhances the economy's built-in stability.
b. reduces the economy's built-in stability.
c. neither increases nor decreases built-in stability.
d. increases the MPC and therefore increases the size of the multiplier.
Answer the next question(s) on the basis of the following sequence of events inv
olving fiscal policy:
(1) The composite index of leading indicators turns downward for three consecuti
ve months; (2) Economists reach agreement that the economy is moving into a rece
ssion; (3) A tax cut is proposed in Congress; (4) The tax cut is passed by Congr
ess and signed by the President; (5) Consumption spending begins to rise, aggreg
ate demand increases, and the economy begins to recover.
Refer to the above information. The administrative lag of fiscal policy is refle
cted in events:
Select one:
a. 1 and 2.
b. 2 and 3.
c. 3 and 4.
d. 4 and 5.
The M2 money supply may be larger or smaller than the MZM money supply depending
on the size of small time deposit balances and Money Market Mutual Fund balance
s held by businesses.
Select one:
True
False