ECON Chapter 15

Every hour, the federal government spends about

$250 million

The federal budget is put together

by Congress and the White House.

An example of expansionary fiscal policy would be

cutting taxes.

All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT

the need for discretionary spending.

All of the following people are well-known classical economists EXCEPT

Arthur Laffer

In contrast with classical economics, Keynesian economics

takes a broader view of the economy.

When revenues exceed expenditures,

there is a budget surplus.

when you buy a United States Savings Bond, you

loan money to the government.

Keynesian economics failed to deal successfully with

high inflation during the 1970s.

The national debt rose during Ronald Reagan’s term as President for all of the following reasons EXCEPT

the costs of running a war.

The Office of Management and Budget

is responsible for deciding how much money each government agency receives in the budget.

An example of contractionary fiscal policy would be

decreasing government spending.

The purpose of expansionary fiscal policy is to

increase output.

All of the following are reasons why it is difficult to implement balanced fiscal policy EXCEPT

the need for discretionary spending.

All of the following are characteristics of classical economics EXCEPT

a significant role for government in the running of the economy.

An example of an automatic stabilizer is

taxes.

Supporters of supply-side economics believe that

taxes have a strong negative influence on economic output.

All of the following are problems associated with high national debt EXCEPT that it

makes investing in treasury bonds, notes, and bills very risky.

An accurate statement about achieving a balanced budget would be that

most states require a balanced budget for state spending.

The federal government’s Fiscal Year 2007 begins on

October 1, 2006.

Congress has just passed several bills outlining the federal budget. What is the next step in the budget process?

The President signs the budget into law or vetoes it and sends it back to Congress.

What leads directly to the crowding-out-effect?

a big federal budget deficit

Which of these statements is a fundamental part of Keynesian economics?

The government can use deficit spending to increase aggregate demand and pull the economy out of recession.

What is one example of an automatic stabilizer?

food stamps

Which of these statements is a fundamental part of supply-side economics?

The government should reduce taxes to promote economic growth by increasing aggregate supply.

The Laffer curve predicts the effects of changes in the tax rate on

tax revenues.

Which of these is a contractionary fiscal policy?

The President and Congress pass a new two-cent-per-gallon gasoline tax.

The President has vetoed several appropriations bills. What is the next step in the budget process?

Congress can vote to override the vetoes or pass new appropriations bills that the President is likely to sign

What will lead DIRECTLY to a government "shut down"?

The President vetoes Congress’s appropriations bills.

Why makes increased government spending an effective tool for increasing demand?

the multiplier effect

How did the Great Depression relate to the school of classical economics?

The Great Depression appeared to disprove the classical theory that demand and supply could return to a healthy equilibrium through market forces alone.

Which statement describes the federal government’s fiscal policies in the 1980s?

Income tax rates were reduced, but spending increased.

Which of these Presidents increased top marginal income tax rates during his term in office?

Franklin D. Roosevelt

Robin buys a newly-issues Treasury bond, Treasury note, and Treasury bill. Which will mature and be repaid by the government LAST?

Treasury bond