Exam Questions
142. Fiscal policy is defined as a. changes in government expenditure to influence the economy. b. changes in tax rates to influence the economy. c. changes in the money supply to influence the economy.
* d. both a and b but not c.
143. Expansionary fiscal policy financed by government borrowing can lead to a. higher interest rates and lower private investment under the crowding-out view. b. an increase in aggregate demand under the Keynesian view. c. no change in aggregate demand under the new classical view.
* d. all of the above.
144. A balanced budget means that a. aggregate consumption is in balance with aggregate saving. b. government spending is constant from year to year. c. public spending equals private spending.
* d. tax revenues during a period are equal to government expenditures.
145. The crowding-out effect implies that budget deficits will
* a. increase real interest rates and lower the future stock of private capital. b. decrease real interest rates and increase the future stock of private capital. c. increase the productivity of workers in the future. d. lead to higher levels of income for workers in the future.
146. The crowding-out effect suggests that a. expansionary fiscal policy causes inflation. b. high marginal tax rates crowd out tax deductions.
* c. fiscal policy will be less effective at shifting aggregate demand because the effects are at least partially offset by other factors that result. d. a budget surplus will cause the economy to slip into a major recession.
147. The new classical model implies that the effect of government increasing expenditures by debt financing
* a. has the same effect as if it was financed by raising current taxes. b. is highly expansionary on aggregate demand and the economy. c. will result in higher real interest rates. d. will result in lower personal savings.
148. Which of the following is not an example of an automatic stabilizer? a. unemployment
* d. both a and b but not c.
143. Expansionary fiscal policy financed by government borrowing can lead to a. higher interest rates and lower private investment under the crowding-out view. b. an increase in aggregate demand under the Keynesian view. c. no change in aggregate demand under the new classical view.
* d. all of the above.
144. A balanced budget means that a. aggregate consumption is in balance with aggregate saving. b. government spending is constant from year to year. c. public spending equals private spending.
* d. tax revenues during a period are equal to government expenditures.
145. The crowding-out effect implies that budget deficits will
* a. increase real interest rates and lower the future stock of private capital. b. decrease real interest rates and increase the future stock of private capital. c. increase the productivity of workers in the future. d. lead to higher levels of income for workers in the future.
146. The crowding-out effect suggests that a. expansionary fiscal policy causes inflation. b. high marginal tax rates crowd out tax deductions.
* c. fiscal policy will be less effective at shifting aggregate demand because the effects are at least partially offset by other factors that result. d. a budget surplus will cause the economy to slip into a major recession.
147. The new classical model implies that the effect of government increasing expenditures by debt financing
* a. has the same effect as if it was financed by raising current taxes. b. is highly expansionary on aggregate demand and the economy. c. will result in higher real interest rates. d. will result in lower personal savings.
148. Which of the following is not an example of an automatic stabilizer? a. unemployment