. Which of the following is an example of discretionary fiscal policy? (Points : 3) an increase in unemployment insurance payments during a recession an increase in income tax receipts with rising income during an expansion the tax cuts passed by Congress in 2001 to combat the recession a decrease in food stamps issued during an expansion or boomQuestion 2.2.
The majority of dollars spent by government prior to the Great Depression was spending at the ________ level. In the post World War II period, two-thirds to three quarters of all dollars spent by government in the United States are spent at the ________ level (Points : 3) federal; state and local state and local; federal state and local; state local; stateQuestion 3.3. The fastest growing category of government expenditure is (Points : 3) grants to state and local governments. defense spending. transfer payments. government purchases.4.Year Potential Real GDP Real GDP Price Level2013 $14.0 trillion $14.0 trillion 1502014 14.5 trillion 14.8 trillion 154Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy. If the Congress and the president want to keep real GDP at its potential level in 2014, they should(Points : 3) buy Treasury securities. conduct expansionary fiscal policy. decrease government purchases. decrease the discount rate.5. A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008. (Points : 3) increase; more increase; less decrease; more decrease; less6. if government spending and the price level increase, then (Points : 3) the interest rate increases, consumption declines, and investment spending declines. the interest rate decreases, consumption declines, and investment spending declines. the interest rate increases, consumption increases, and investment spending increases. the interest rate decreases, consumption increases, and investment spending increases.7. During recessions, government expenditure automatically (Points : 3) falls because of programs such as unemployment insurance and Medicaid. rises because of programs such as unemployment insurance and Medicaid. falls because of the progressive income tax system. rises because of the progressive income tax system.8. According to the short-run Phillips curve, the unemployment rate and the inflation rate are (Points : 3) unrelated. positively related. negatively related. unaffected by monetary policy.9. What is the natural rate of unemployment? (Points : 3) the unemployment rate that exists when the economy is at potential GDP the unemployment rate that exists when the economy is at a trough in a business cycle an unemployment rate of 0% any unemployment rate that is above the inflation rate10. What impact does monetary policy have on the long-run Phillips curve? (Points : 3) Monetary policy can only shift the long-run Phillips curve to the left. Monetary policy shifts the long-run Phillips curve to the right or left, depending on whether monetary policy is expansionary or contractionary. Monetary policy can only shift the long-run Phillips curve to the right. Monetary policy has no impact on the long-run Phillips curve.11. In the long run, the Federal Reserve can control which of the following? (Points : 3) the inflation rate the unemployment rate the growth rate of real GDP in the economy the natural rate of unemployment12. Contractionary monetary policy will result in (Points : 3) higher interest rates. increased rates of inflation. an upward shift in the short-run Phillips curve. a leftward shift in the long-run Phillips curve.13. If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent, how do you expect workers and firms to react? (Points : 3) As long as the Fed’s announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation.