Question : 9.4   The Economy’s Influence the Government Budget 1) Which of the : 1381138

9.4   The Economy’s Influence on the Government Budget

1) Which of the following is a CORRECT sequence of events during a recession?

A) unemployment falls, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

B) unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

C) unemployment rises, income falls, tax revenue rises, unemployment benefits fall, and the budget deficit falls

D) unemployment rises, income rises, tax revenue rises, unemployment benefits rise, and the budget deficit rises

2) Which of the following is a CORRECT sequence of events during an expansion?

A) unemployment falls, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit falls

B) unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

C) unemployment rises, income falls, tax revenue rises, unemployment benefits fall, and the budget deficit falls

D) unemployment falls, income rises, tax revenue rises, unemployment benefits fall, and the budget deficit falls

3) The presence of automatic stabilizers means that the federal deficit is ________ than it otherwise would be in a recession and ________ than it otherwise would be in an expansion.

A) larger; smaller

B) smaller; larger

C) smaller; smaller

D) larger; larger

4) During a recession, automatic stabilizers cause the federal deficit to

A) decrease.

B) either increase or decrease.

C) remain unchanged.

D) increase.

5) An example of an automatic stabilizer is

A) the food stamp program.

B) changing the tax laws to increase the marginal tax rates.

C) the indexation of social security benefits to the consumer price index.

D) the interest the government pays on loans.

6) If the economy is in a recession, the full-employment deficit is ________ the actual deficit.

A) larger than

B) equal to

C) smaller than

D) equal to or larger than

7) If the economy’s full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

A) natural employment deficit.

B) cyclical deficit.

C) structural deficit.

D) debt deficit.

8) If the economy’s full-employment output is $9 trillion, actual output is $9 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

A) natural employment deficit.

B) cyclical deficit.

C) structural deficit.

D) fiscal deficit.

9) Assume that in the United States the actual deficit is $300 billion. If the United States were at full employment, the deficit would be $100 billion. The structural deficit in the United States is

A) $100 billion.

B) $200 billion.

C) $300 billion.

D) $400 billion.

10) Assume that in Atlantis the actual deficit is $200 billion. If Atlantis were at full employment, the deficit would be $50 billion. The structural deficit in Atlantis is

A) $50 billion.

B) $100 billion.

C) $150 billion.

D) $200 billion.