A) in surplus by 10 percent.
B) in surplus by something less than 10 percent.
C) in surplus by something more than 10 percent.
D) in deficit by a percentage that depends on the size of the outstanding debt.
E) none of the above.
G) C) and D)
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D
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A) make the marginal propensity to consume smaller than it otherwise would be.
B) make the investment multiplier larger than it otherwise would be.
C) make the IS curve steeper than it otherwise would be.
D) make monetary policy less effective in moving GDP around in the short run than it otherwise would be.
E) all of the above.
G) B) and D)
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A) monetary policy must have been expansionary.
B) the budget in real terms is also in balance.
C) the budget in real terms is in surplus.
D) the budget in real terms is in deficit.
E) a and b.
G) B) and C)
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A) strongly procyclical in part because tax revenues rise during recession and fall during boom.
B) strongly anticyclical in part because tax revenues fall during recession and rise during boom.
C) strongly procyclical in part because transfers rise during recession and fall during boom.
D) strongly procyclical in part because tax revenues are stable over the business cycle even as transfers rise during recession and fall during boom.
E) none of the above.
G) A) and D)
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A) Purchases of goods and services by state and local governments exceed the purchases of goods and services made by the federal government by more than 2 to 1.
B) Expenditure by the federal government on defense exceeded total outlays of state and local governments.
C) State and local governments pay more interest than they earn each year, but the federal government earns more than it pays.
D) Both b and c.
E) None of the above.
G) C) and D)
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D
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A) The federal income tax rate is computed as a proportion of disposable income.
B) Federal income tax rates are progressive and thus increase with disposable income.
C) All kinds of taxes discourage work and thus reduce GDP, but the income tax creates the smallest of these work disincentives.
D) The federal income tax is constructed so that the middle-class taxpayer pays the largest share.
E) None of the above.
G) C) and D)
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A) no year since 1969.
B) every year since 1997.
C) every year before 1969.
D) during the years 1998-2001.
E) no year before 1998.
G) A) and E)
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A) The aggregate demand curve should become steeper because monetary policy is less effective.
B) The aggregate demand curve should become steeper because monetary policy is more effective.
C) The aggregate demand curve should become flatter because monetary policy is more effective.
D) The aggregate demand curve should become flatter because monetary policy is less effective.
E) There should be no change in the slope of the aggregate demand curve.
G) B) and E)
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A) works by changing disposable income and thus indirectly personal consumption; the link between income and consumption is uncertain.
B) generates a response that depends on the uncertain perception of the permanence of the change.
C) implies a change in the government's intertemporal budget constraint and its future need for revenue; people with different perceptions of that need react differently to a tax change.
D) creates an uncertain shift in an IS curve for all these reasons.
E) none of the above.
G) A) and E)
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A) the average exemption allowed for each dependent in a taxpayer's family increases with income.
B) the average tax rate paid by individuals climbs with GDP for all levels of GDP.
C) the marginal tax rate paid by individuals falls with GDP even while the average tax rate moves in the opposite direction.
D) the average level of disposable income climbs with personal income.
E) none of the above.
G) A) and C)
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A) The structural deficit equals the sum of the actual deficit and the cyclical deficit.
B) The structural deficit equals the difference between the actual deficit and its cyclical component.
C) The cyclical deficit matches the actual deficit in the United States because the structural deficit is negligible.
D) The actual deficit represents the sum of the structural and cyclical deficits if the current account of the trade balance is included in the structural component.
E) None of the above.
G) C) and D)
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B
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A) move procyclically with GDP because they are constructed to increase or decrease automatically as tax receipts climb or fall with GDP.
B) move countercyclically with GDP because they are constructed to increase or decrease automatically as changes in GDP cause corresponding changes in the number of people eligible for payment.
C) are not well correlated with changes in GDP in part because the discretionary power to enact changes in fiscal policy is diluted across too many congressional committees.
D) vary directly with tax revenues and therefore play no role in stabilization policy.
E) none of the above.
G) B) and D)
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A) tax collections, both automatic and discretionary.
B) transfer payments.
C) dividend payments.
D) all of the above.
E) none of the above.
G) A) and C)
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A) less than 10 percent of the revenue collected to run state and local governments.
B) approximately 25 percent of the revenue collected to run state and local governments.
C) approximately 33 percent of the revenue collected to run state and local governments.
D) approximately 40 percent of the revenue collected to run state and local governments.
E) well over 40 percent of the revenue collected to run state and local governments.
G) B) and C)
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A) move procyclically with GDP as governments that collect more or less in taxes over the cycle spend more or less on goods and services.
B) move countercyclically with GDP as governments try to smooth out the cycle by spending more on goods and services in recession and less during booms.
C) are not very well correlated with changes in GDP because discretionary adjustments in purchasing arrangements take a long time to consummate and are almost never canceled.
D) are one of the major causes of business cycles as we now understand them.
E) none of the above.
G) A) and E)
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A) unemployment insurance programs that pay benefits to workers who lose their jobs during recession
B) e m p l oye r-funded unemployment programs for wh i ch mandated contri- butions climb as the number of unemployment claims climbs in re c e s s i o n
C) Medicaid that assists poor families with medical expenses
D) Social Security programs for which participation rates swell when jobs get tight in recession and older Americans find it difficult to find work
E) food stamp programs that pay benefits to families with incomes below a given threshold
G) B) and C)
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A) the rate of growth of GDP because tax revenues climb and transfer payments contract as GDP swells.
B) inflation because tax revenues climb and expenditures automatically fall during periods of inflation.
C) the rate of unemployment because people who are out of work pay no tax and swell the roles of those eligible for transfer payments.
D) interest rates because higher rates mean higher earnings on government bonds and thus more income from nontax sources.
E) none of the above.
G) B) and E)
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A) Defense expenditures exceeded the revenue generated by the corporate income tax.
B) Transfer payments exceeded the revenue generated by social security taxes.
C) Transfer payments exceeded the revenue generated by the individual income tax.
D) Income and social security taxes made up well over 80 percent of federal receipts.
E) All of the above.
G) B) and E)
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A) Floating new bonds
B) Purchasing existing bonds
C) Calling in foreign debt
D) Turning over existing debt with advantageously lower interest rates
E) Printing less new money
G) B) and D)
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A) necessarily fall because unemployment compensation transfers would maintain aggregate demand.
B) rise or fall depending on circumstance.
C) necessarily rise because people who previously faced relatively low tax rates would no longer be included in the average.
D) not be changed because the tax schedule was not altered.
E) none of the above.
G) A) and B)
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