Econ: Ch. 10

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    Fill in the blanks. In 2005, total federal spending was ________ and total spending was ________. $962 billion; 927 billion

    • $962 billion; 927 billion
    • $2,142 billion; $2,473 billion
    • $1,329 billion; $794 billion
    • A smaller fraction of GDP; a larger fraction of GDP
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Econ: Ch. 10 - Quiz
About This Quiz

Economics. Chapter 10.

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  • 2. 

    Which of the following is the largest component of federal spending?

    • Defense.

    • Entitlements and mandatory spending.

    • Discretionary spending.

    • Means-tested spending.

    Correct Answer
    A. Entitlements and mandatory spending.
  • 3. 

    Changes in taxes and spending that happen without actions by the government are called:

    • Discretionary fiscal policy changes.

    • Automatic stabilizers.

    • Discretionary stabilizers.

    • Autonomous fiscal expenditures.

    Correct Answer
    A. Automatic stabilizers.
  • 4. 

    When the economy is in a recession, the government should:

    • Reduce expenditures and leave taxes constant in order to stimulate aggregate demand.

    • Increase government purchases or decrease taxes in order to increase aggregate demand.

    • Decrease government purchases or increase taxes in order to decrease aggregate supply.

    • Change spending and taxation but not aggregate demand or aggregate supply.

    Correct Answer
    A. Increase government purchases or decrease taxes in order to increase aggregate demand.
  • 5. 

    When is it a good idea to run a government budget deficit in order to offset the adverse effect of the business cycle and thus help to stabilize the economy?

    • During an expansion.

    • During a recession.

    • During a boom.

    • At any moment throughout the business cycle.

    Correct Answer
    A. During a recession.
  • 6. 

    Fill in the blanks. The prospect of future deficits ___________ the ability of the U.S. government to conduct expansionary fiscal policy in the near future.

    • Enhances

    • Sharply limits

    • Has no effect on

    • May enhance or limit

    Correct Answer
    A. Sharply limits
  • 7. 

    To replicate the behavior of the economy mathematically and statistically and to assist in developing economic forecasts, economists use:

    • Economic engineering.

    • New growth theory.

    • Econometric models.

    • Fiscal theory.

    Correct Answer
    A. Econometric models.
  • 8. 

    The crowding out effect that can occur in the long run as a result of running budget deficits is an illustration of a key principle of economics. Which one?

    • The principle of opportunity cost.

    • The real-nominal principle.

    • The principle of diminishing returns.

    • The principle of voluntary exchange.

    • The marginal principle.

    Correct Answer
    A. The principle of opportunity cost.
  • 9. 

    When is the government able to buy back some of the bonds previously sold to the public?

    • When it runs a budget deficit.

    • When it runs a budget surplus.

    • When it runs a budget balance.

    • None of the above. Such purchase is impossible.

    Correct Answer
    A. When it runs a budget surplus.
  • 10. 

    Supply-side economics is a school of economic thought that emphasizes:

    • The negative impacts of a budget deficit on the economy as a whole.

    • The role played by AD in determining the level of AS.

    • The role taxes play in the supply of output in the economy.

    • The impact of government spending on consumption.

    Correct Answer
    A. The role taxes play in the supply of output in the economy.
  • 11. 
    Refer to the diagram below. Which of the policies in the diagram is an ill-timed policy? - ProProfs

    Refer to the diagram below. Which of the policies in the diagram is an ill-timed policy?

    • A.

    • B.

    • Both A and B.

    • Neither A nor B.

    Correct Answer
    A. B.
  • 12. 

    Some social programs are means-tested, which means that:

    • The spending on those programs has been matched by taxes that raise the revenue necessary to run them.

    • They are partly based on the income of the recipient.

    • The government has tested the program and knows it will accomplish its goals.

    • The government only carries out the spending if its revenue is sufficient; in other words, it is not allowed to borrow money to fund these programs

    Correct Answer
    A. They are partly based on the income of the recipient.
  • 13. 

    When did the United States government start to embrace an active fiscal policy?

    • During the Great Depression.

    • During the Kennedy administration.

    • During the Vietnam War Era.

    • During the Reagan administration.

    Correct Answer
    A. During the Kennedy administration.
  • 14. 

    The tax cuts enacted during 1981 were justified on the basis of:

    • Slowing the economy down.

    • Increasing the supply of output.

    • Increasing the demand for goods and services.

    • Helping households go through a boom period of economic activity.

    Correct Answer
    A. Increasing the supply of output.
  • 15. 

    What type of outlay is defense spending?

    • A part of discretionary spending.

    • An entitlement.

    • A part of mandatory spending.

    • A part of automatic spending.

    Correct Answer
    A. A part of discretionary spending.
  • 16. 

    Government policies that increase aggregate demand are called:

    • Economic policies.

    • Fiscal policies.

    • Expansionary policies.

    • Forward-looking policies.

    Correct Answer
    A. Expansionary policies.
  • 17. 
    Refer to the figure below. Which of the graphs is an example of stabilization polices, or actions to move the economy closer to full employment or potential output. - ProProfs

    Refer to the figure below. Which of the graphs is an example of stabilization polices, or actions to move the economy closer to full employment or potential output.

    • The graph on the left.

    • The graph on the right.

    • Both graphs.

    • Neither graph.

    Correct Answer
    A. Both graphs.
  • 18. 

    Federal government revenue, as a percent of GDP, was approximately 17.5% in 2005. What percent of GDP was the revenue collected from corporations?

    • Almost the entire 17.5%.

    • 7.6%.

    • 6.5%.

    • 2.2%.

    Correct Answer
    A. 2.2%.

Quiz Review Timeline (Updated): Jan 11, 2013 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Jan 11, 2013
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 25, 2010
    Quiz Created by
    Mruegg91
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