Question : 18.1   What Fiscal Policy? 1) Part of the spending the Caldecott : 1266983

18.1   What is Fiscal Policy?

1) Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act, which is an example of ________ aimed at increasing real GDP and employment.

A) discretionary fiscal policy

B) an automatic stabilizer

C) contractionary fiscal policy

D) a transfer payment

2) If Congress passed a one-time tax cut in order to stimulate the economy in 2010, and tax rate levels returned to their pre-2010 level in 2011, how should this tax cut affect the economy?

A) Households on average would save an amount equal to the tax cut.

B) The tax cut would stimulate spending by households.

C) The tax cut would shift the aggregate demand curve to the right.

D) The tax cut would raise the price level in 2010.

3) Fiscal policy refers to changes in

A) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.

B) federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

C) federal taxes and purchases that are intended to fund the war on terrorism.

D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives.

4) Which of the following would be classified as fiscal policy?

A) The federal government passes tax cuts to encourage firms to reduce air pollution.

B) The Federal Reserve cuts interest rates to stimulate the economy.

C) A state government cuts taxes to help the economy of the state.

D) The federal government cuts taxes to stimulate the economy.

E) States increase taxes to fund education.

5) Which of the following is an objective of fiscal policy?

A) energy independence from Middle East oil

B) health care coverage for all Americans

C) discovering a cure for AIDs

D) high rates of economic growth

E) homeland security

6) Automatic stabilizers refer to

A) the money supply and interest rates that automatically increase or decrease along with the business cycle.

B) government spending and taxes that automatically increase or decrease along with the business cycle.

C) changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives.

D) changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

7) The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

A) automatic stabilizers.

B) discretionary fiscal policy.

C) discretionary monetary policy.

D) automatic monetary policy.

8) The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

A) automatic stabilizers.

B) discretionary fiscal policy.

C) discretionary monetary policy.

D) automatic monetary policy.

9) Which of the following would not be considered an automatic stabilizer?

A) legislation increasing funding for job retraining passed during a recession

B) decreasing unemployment insurance payments due to decreased jobless during an expansion

C) rising income tax collections due to rising incomes during an expansion

D) declining food stamp payments due to more persons finding jobs during an expansion

10) Before the Great Depression of the 1930s, the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________.

A) state and local levels; federal level

B) local level; federal level

C) federal level; state and local levels

D) federal level; state level