21) Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

A) reduce the interest rate and so allow firms to increase their level of investment.

B) increase taxes so the budget is always balanced.

C) raise the exchange rate so U.S. exports become more attractive to foreigners.

D) mean disposable income does not change by as much as real GDP.

E) increase the quantity of money in circulation.

22) Which of the following is true?

A) Automatic stabilizers are used to eliminate recessions.

B) Discretionary fiscal policy cannot eliminate a recession.

C) Automatic stabilizers help to reduce the impact of a recession.

D) Discretionary fiscal policy can automatically eliminate a recession.

E) Automatic stabilizers make discretionary policy more effective by increasing the magnitude of the multipliers.

23) Automatic stabilizers

A) increase the magnitude of the government expenditure multiplier.

B) decrease the magnitude of the government expenditure multiplier.

C) have no effect on the magnitude of the government expenditure multiplier.

D) reduce the government expenditure multiplier to zero.

E) increase the magnitude of the tax multiplier.

24) The structural deficit or surplus is the

A) difference between actual government outlays and actual government revenues.

B) change in national debt that will result from current budgetary policies.

C) government budget deficit or surplus that would occur if the economy were at full employment.

D) difference between actual government outlays and what would be government revenues if the economy were at full employment.

E) actual government budget deficit or surplus minus expenditures for capital improvements.

25) The structural deficit is the deficit

A) during a recession.

B) during an expansion.

C) that would occur at full employment.

D) caused by the business cycle.

E) that does not increase the national debt.

26) The structural surplus

A) equals the actual surplus plus the cyclical surplus.

B) is the government budget surplus that would exist if the economy was at full employment.

C) is, by definition, equal to the negative of the cyclical deficit.

D) is legally required to be positive.

E) fluctuates over the business cycle.

27) The cyclical deficit is the portion of the deficit

A) created by fluctuations in real GDP.

B) that is the result of nondiscretionary federal spending.

C) that would exist if the economy were at full employment.

D) that is the result of discretionary federal spending.

E) that does not add to the national debt.

28) When an economy is above full employment and the government has a budget deficit, that deficit

A) exceeds the structural deficit.

B) is equal to the cyclical deficit.

C) is equal to the structural deficit minus the cyclical deficit.

D) is equal to the cyclical deficit minus the structural deficit.

E) is less than the structural deficit.

29) The actual budget deficit is equal to the

A) structural deficit.

B) cyclical deficit.

C) structural deficit minus the cyclical deficit.

D) cyclical deficit minus the structural deficit.

E) structural deficit plus the cyclical deficit.

30) If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

A) $10 billion.

B) $40 billion.

C) $60 billion.

D) $50 billion.

E) More information is need to answer the question.

21) Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

A) reduce the interest rate and so allow firms to increase their level of investment.

B) increase taxes so the budget is always balanced.

C) raise the exchange rate so U.S. exports become more attractive to foreigners.

D) mean disposable income does not change by as much as real GDP.

E) increase the quantity of money in circulation.

22) Which of the following is true?

A) Automatic stabilizers are used to eliminate recessions.

B) Discretionary fiscal policy cannot eliminate a recession.

C) Automatic stabilizers help to reduce the impact of a recession.

D) Discretionary fiscal policy can automatically eliminate a recession.

E) Automatic stabilizers make discretionary policy more effective by increasing the magnitude of the multipliers.

23) Automatic stabilizers

A) increase the magnitude of the government expenditure multiplier.

B) decrease the magnitude of the government expenditure multiplier.

C) have no effect on the magnitude of the government expenditure multiplier.

D) reduce the government expenditure multiplier to zero.

E) increase the magnitude of the tax multiplier.

24) The structural deficit or surplus is the

A) difference between actual government outlays and actual government revenues.

B) change in national debt that will result from current budgetary policies.

C) government budget deficit or surplus that would occur if the economy were at full employment.

D) difference between actual government outlays and what would be government revenues if the economy were at full employment.

E) actual government budget deficit or surplus minus expenditures for capital improvements.

25) The structural deficit is the deficit

A) during a recession.

B) during an expansion.

C) that would occur at full employment.

D) caused by the business cycle.

E) that does not increase the national debt.

26) The structural surplus

A) equals the actual surplus plus the cyclical surplus.

B) is the government budget surplus that would exist if the economy was at full employment.

C) is, by definition, equal to the negative of the cyclical deficit.

D) is legally required to be positive.

E) fluctuates over the business cycle.

27) The cyclical deficit is the portion of the deficit

A) created by fluctuations in real GDP.

B) that is the result of nondiscretionary federal spending.

C) that would exist if the economy were at full employment.

D) that is the result of discretionary federal spending.

E) that does not add to the national debt.

28) When an economy is above full employment and the government has a budget deficit, that deficit

A) exceeds the structural deficit.

B) is equal to the cyclical deficit.

C) is equal to the structural deficit minus the cyclical deficit.

D) is equal to the cyclical deficit minus the structural deficit.

E) is less than the structural deficit.

29) The actual budget deficit is equal to the

A) structural deficit.

B) cyclical deficit.

C) structural deficit minus the cyclical deficit.

D) cyclical deficit minus the structural deficit.

E) structural deficit plus the cyclical deficit.

30) If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is

A) $10 billion.

B) $40 billion.

C) $60 billion.

D) $50 billion.

E) More information is need to answer the question.

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