Transcript Both Fiscal Policy

I do not
set interest rates!
I’m in charge of
Taxes & Gov’t
Spending
Fiscal Policy
&
Monetary Policy
Practice Government Test
Business Cycle
Both Fiscal Policy & Monetary Policy attempt to “smooth”
the “ups & downs” of the Business Cycle
Expansionary Fiscal policy would
include:
A.
B.
C.
D.
E.
Lowering Taxes
Raising Gov’t spending
Increasing the National Debt
All listed are true (A, B & C)
Only A & B are true
The U.S. Debt is approximately:
A.
B.
C.
D.
E.
11 Trillion => 35% of GDP
11 Trillion => 70% of GDP
9 Trillion => 25% of GDP
9 Trillion => 90% of GDP
What debt?
The U.S. currently has a
A.
B.
C.
D.
Cyclical deficit
Structural deficit
Seasonal deficit
Frictional deficit
Which is NOT true about
crowding out?
A. It is an economic theory
B. It has not occurred in the U.S. (yet….)
C. As the national debt ↑, crowding out threatens
to increase short term interest rates
D. The 800 billion Fiscal Stimulus plan could lead
to crowding out in the future…
E. All listed are TRUE
Which statement is NOT true
A. AS is flat during recessions
B. The U.S. economy is currently in section-1
C. In section-3, the Fed should worry about
inflation
D. In section-3 the unemployment
rate could be
Inflation
AS 5%
3
E. All listed are TRUE
2
1
1
Real
GDP
The Economy in the graph urgently requires:
A.
B.
C.
D.
E.
Expansionary Fiscal policy
Contractionary Fiscal Policy
Loose Monetary Policy
Tight Monetary Policy
None of the above
AS1
Inflation
AD1
Real
GDP
Which is not true about
expansionary fiscal policy
A.
B.
C.
D.
E.
Consumers get tax cuts
Price
Gov’t increases spending Level
AD shifts to the right
The unemployment rate falls
All listed are true
AS1
AD1
Real
GDP
AD2
The Federal Reserve
A.
B.
C.
D.
E.
Can increase money supply by selling bonds
Can lower income taxes
Can lower interest rates by buying bonds
Controls long term interest rates
Only A & C are true
If interest rates increase, which is true:
A.
B.
C.
D.
E.
Borrowing money becomes more expensive
?
You are less likely to buy a house
5%
You are less likely to buy a car
People have a higher incentive to save
All listed are true
10%
Who is hurt by rising inflation
A.
B.
C.
D.
E.
People who live on a fixed income
People who are in large amounts of debt
People who have saved money
All listed (A, B, C)
Only A & C
Raising Income tax rates will:
A.
B.
C.
D.
increase tax revenue
decrease tax revenue
Not meaningfully increase tax revenue
“It Depends” on the current level of income
taxes
Which economists would favor tax credits
for solar power companies
A.
B.
C.
D.
Keynesian Economists
Classical Economists
Supply Side Economists
No economist would support tax credits