Question

1.The Keynesian recommendation for a policy response to arecession consists of:

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a.increased government spending with tax cuts.

b.decreased government spending with tax cuts.

c.increased government spending with tax increases.

d.decreased government spending with tax increases.

2.In the short term, an increase in government spending:

a.lowers taxes and wages.

b.raises prices and wages.

c.raises taxes, but lowers wages.

d.raises wages and lowers inflation.

3.During a recession, government spending to push up output andreduce unemployment is called:

a.inflationary.

b.stimulative.

c.deflationary.

d. a fiscal devaluation.

4. The single biggest federal tax is the:

a.excise tax.

b.federal income tax.

c.estate tax.

d.corporate income tax.

5. An increase in the GDP from a $1 cut in taxes is called:

a.the GSE (government spending effect).

b.the tax multiplier.

c.the fiscal multiplier.

d.the base multiplier.

6. What is it called when the federal government's revenueequals its expenses?

a.A lowered budget

b.A balanced budget

c.A fiscally balanced budget

d.Fiscal net

7.Supply-side economics argues that changes in ________affect(s) incentives to work.

a. marginal tax rates

b.marginal income

c.marginal profit

d.marginal balance

8. A result of budget deficits is that governments have toborrow more, sometimes resulting in:

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increasing interest costs.

b.decreasing interest costs.

c.increased foreign borrowing.

d. crowding out the private sector for capital.