Chapter 12

Question 1

There is a recessionary gap win

Answer 1

The equilibrium GDP smaller than full employment GDP

Question 2

Over the last four decades we have had

Answer 2

Deficits and surpluses

Question 3

Which statement is true about automatic stabilizers

Answer 3

They have help smooth out the business cycle

Question 4

Statement 1 the federal budget deficit more than doubled between 1987 in 1992.
Statement 2 high federal budget deficits tend to push real interest rates.

Answer 4

Both are true

Question 5

When there is a recession the biggest percentage decline would be in

Answer 5

Corporate after-tax profits

Question 6

Each of the following is an example of discretionary fiscal policy except

Answer 6

The unemployment insurance program

Question 7

If the equilibrium GDP is 1 trillion greater than full employment GDP and there is an inflationary gap of 250 billion the multiplier is

Answer 7

4

Question 8

The national debt past the 2 trillion mark in what year

Answer 8

1986

Question 9

True false– over 50% of the outstanding public debt is owned by foreigners

Answer 9

True

Question 10

In 1930 John Maynard Keynes said that our main economic problem was

Answer 10

A week aggregate demand

Question 11

true or false—because of the national debt grows each year, we have to pay more and more interest on the debt; because interest payment keep rising, or deficits keep growing, further pushing up the debt.

Answer 11

True

Question 12

Right now our national debt is

Answer 12

Over 8 trillion

Question 13

Between the years 1989 in 1992 are federal budget deficit

Answer 13

Rose substantially

Question 14

In the mid-1990s the federal budget deficit

Answer 14

Rose slightly

Question 15

Large budget deficits tend to

Answer 15

Raise interest rates

Question 16

Interest rates in the United States would have been higher in recent years had it not been for

Answer 16

The inflow of funds from foreigners

Question 17

When government expenditures in a given year exceed tax receipts there exists

Answer 17

A budget deficit

Question 18

And illustration of the term automatic stabilizer is provided by

Answer 18

The tendency of tax collections to fall as the economy moves into a recession

Question 19

It’s full employment GDP is 1 trillion and equilibrium GDP is 7 trillion

Answer 19

There is definitely a recession gap

Question 20

The reason the multiplier is greater than one is that

Answer 20

Income is re-spent

Question 21

John Maynard Keynes Believe that

Answer 21

We could spend our way out of the great depression

Question 22

When government expenditures in a given year less than tax receipts there exists

Answer 22

A budget surplus

Question 23

Supposed to deficit in the year 2010 is 500 billion in the year 2011 it falls did 200 billion if the national debt is the at the beginning of year 2010 is 10 trillion how much will it be at the end of the year 2011?

Answer 23

10.7 trillion

Question 24

Automatic stabilizers do what

Answer 24

For probably insufficient to completely offset strong recessionary pressures

Question 25

Fiscal policy deals with each of the following except

Answer 25

The money supply