Question : 16.2   Fiscal Stimulus 1) As contrasted to the mainstream view, Keynesian : 1240645

16.2   Fiscal Stimulus

1) As contrasted to the mainstream view, Keynesian economists believe that ________ than mainstream economists believe.

A) potential GDP is smaller

B) the burden of government debt on future generations is larger

C) the real GDP growth rate is higher

D) fiscal stimulus is weaker

E) the multiplier effect is larger

2) As contrasted to the Keynesian view, mainstream economists believe that ________ than Keynesian economists believe.

A) potential GDP is less important

B) any crowding out effect is smaller

C) the real GDP growth rate is larger

D) the effects from fiscal stimulus are weaker

E) the multiplier effect is larger

3) Mainstream economists believe that Keynesian economists overstate the effect of the multiplier effect. Which of the following statements would mainstream economists NOT consider to be accurate?

A) Effects of a fiscal stimulus are small and short lived.

B) Effects of a fiscal stimulus are incapable of working fast enough to make a difference.

C) A fiscals stimulus does not provide a ‘free lunch’ but does ‘crowd out’ private consumption expenditure and investment.

D) A fiscal stimulus results in bigger government, lower potential GDP, and slower real GDP growth.

E) A fiscal stimulus is a vital tool to fight recession and depression due to the multiplier effect.

4) Automatic stabilizers are defined as

A) actions taken by the President without Congressional consent to stabilize the economy.

B) actions taken by an act of Congress to stabilize the economy.

C) policy that stabilizes without the need for action by the government.

D) discretionary policy taken to stabilize the economy.

E) policy that has no multiplier effects.

5) Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

A) taxes and expenditure.

B) discretionary taxes and expenditure.

C) government.

D) stabilizers.

E) discretionary policy.

6) Fiscal policies that move the economy toward potential GDP without a change in policy are called

A) routine stabilizers.

B) automatic stabilizers.

C) spending stabilizers.

D) economic stabilizers.

E) GDP stabilizers.

7) An example of automatic fiscal policy is

A) Congress passing a tax rate reduction package.

B) the federal government expanding spending at the Department of Education.

C) expenditure for unemployment benefits increasing as economic growth slows.

D) the Federal Reserve reducing interest rates as economic growth slows.

E) a change in taxes that has no multiplier effect.

8) Which of the following is an example of an automatic fiscal policy action?

A) increased unemployment benefit payments resulting from higher unemployment

B) an increase in spending on defense goods resulting from increased world tensions

C) an increase in the tax rate resulting from a desire to shrink the budget deficit

D) a decrease in the tax rate resulting from an effort to increase aggregate demand to combat a recession

E) None of the above answers is correct.

9) In an expansion, federal tax revenues increase proportionally more than real GDP without the need for any government policy. This increase is an example of

A) discretionary monetary policy.

B) automatic monetary policy.

C) automatic fiscal policy.

D) discretionary fiscal policy.

E) the effect of deficit spending.

10) Taxes that change with the level of real GDP and income are called

A) voluntary taxes.

B) GDP taxes.

C) induced taxes.

D) forced taxes.

E) flexible taxes.