AP MACRO(A+ Guaranteed Answers)
The federal budget tends to move toward _____ as the economy ____. correct answersdeficit;
contracts
The government budget balance equals: correct answersTaxes - Government purchases -
Government transfers.
Expansionary fiscal policies: correct answersmake the budget surplus smaller.
The government has a budget deficit if: correct answersits total revenues are less than its total
expenditures.
Budget deficits: correct answersalways increase when unemployment increases and fall when
unemployment falls.
Suppose that U.S. debt is $7 trillion dollars at the beginning of the fiscal year. During the fiscal
year, the government spending and government transfers are $2 trillion and tax revenues equal
$1.5 trillion. At the end of the fiscal year, the debt is: correct answers$7.5 trillion.
When the government has a deficit, it will most likely finance the deficit by: correct
answersborrowing money.
When the government borrows funds in financial markets to pay for budget deficits: correct
answersprivate investment spending may be crowded out.
The national debt _______ in years in which the federal government incurs a _______ . correct
answersrises; deficit
A government would be able to pay off its debt, if: correct answersthe GDP grows faster than the
government's debt.
An expansionary fiscal policy: correct answerswould shift AD to the right and increase the size
of the government budget deficit.
The government deficit: correct answersmeasures the difference between the amount which
government spends and the amount it collects in tax revenues in a given period of time.
If the government experiences a recessionary gap: correct answersholding everything else
constant, the budget deficit would increase.
That is, _________________ make a budget surplus smaller or a budget deficit bigger. correct
answersexpansionary fiscal policies
Conversely, ________________—smaller government purchases of goods and services, smaller
government transfers, or higher taxes—increase the budget balance for that year, making a
budget surplus bigger or a budget deficit smaller. correct answerscontractionary fiscal policies
, In order to separate the effects of the business cycle from the effects of discretionary fiscal
policy, governments estimate the __________________ an estimate of the budget balance if the
economy were at potential output. correct answerscyclically adjusted budget balance.
U.S. government budget accounting is calculated on the basis of __________. correct
answersfiscal years
A __________ runs from October 1 to September 30 and is labeled according to the calendar
year in which it ends. correct answersfiscal year
Persistent budget deficits have long-run consequences because they lead to an increase in
_______________.
This may "crowd out" investment spending, which reduces long-run economic growth. correct
answerspublic debt
And in extreme cases, ________ may lead to government default, resulting in economic and
financial turmoil. correct answersrising debt
A widely used measure of fiscal health is the ____________; This number can remain stable or
fall even in the face of moderate budget deficits if GDP rises over time. correct answersdebt-
GDP ratio.
_____________ are spending promises made by governments that are effectively a debt despite
the fact that they are not included in the usual debt statistics.
The largest ____________ of the US government are Social Security, Medicare, and Medicaid.
correct answersImplicit liabilities
Monetary policy attempts to affect the overall level of spending in the economy by changes in:
correct answersinterest rates and the quantity of money.
Monetary policy involves correct answerschanges in the quantity of money.
The economic policy of changing the quantity of money to influence the interest rate and affect
overall spending in the economy, is known as: correct answersmonetary policy.
Changes in interest rates and the money supply in an effort to change overall spending in an
economy is: correct answersmonetary policy.
The Federal Reserve is able to have an impact on financial crises because the Fed: correct
answersconducts monetary policy.
A sale of bonds by the Fed: correct answersraises interest rates and reduces the money supply.
Suppose the Fed buys bonds. We can expect this transaction to: correct answersincrease the
money supply, increase bond prices, and decrease interest rates.
The federal budget tends to move toward _____ as the economy ____. correct answersdeficit;
contracts
The government budget balance equals: correct answersTaxes - Government purchases -
Government transfers.
Expansionary fiscal policies: correct answersmake the budget surplus smaller.
The government has a budget deficit if: correct answersits total revenues are less than its total
expenditures.
Budget deficits: correct answersalways increase when unemployment increases and fall when
unemployment falls.
Suppose that U.S. debt is $7 trillion dollars at the beginning of the fiscal year. During the fiscal
year, the government spending and government transfers are $2 trillion and tax revenues equal
$1.5 trillion. At the end of the fiscal year, the debt is: correct answers$7.5 trillion.
When the government has a deficit, it will most likely finance the deficit by: correct
answersborrowing money.
When the government borrows funds in financial markets to pay for budget deficits: correct
answersprivate investment spending may be crowded out.
The national debt _______ in years in which the federal government incurs a _______ . correct
answersrises; deficit
A government would be able to pay off its debt, if: correct answersthe GDP grows faster than the
government's debt.
An expansionary fiscal policy: correct answerswould shift AD to the right and increase the size
of the government budget deficit.
The government deficit: correct answersmeasures the difference between the amount which
government spends and the amount it collects in tax revenues in a given period of time.
If the government experiences a recessionary gap: correct answersholding everything else
constant, the budget deficit would increase.
That is, _________________ make a budget surplus smaller or a budget deficit bigger. correct
answersexpansionary fiscal policies
Conversely, ________________—smaller government purchases of goods and services, smaller
government transfers, or higher taxes—increase the budget balance for that year, making a
budget surplus bigger or a budget deficit smaller. correct answerscontractionary fiscal policies
, In order to separate the effects of the business cycle from the effects of discretionary fiscal
policy, governments estimate the __________________ an estimate of the budget balance if the
economy were at potential output. correct answerscyclically adjusted budget balance.
U.S. government budget accounting is calculated on the basis of __________. correct
answersfiscal years
A __________ runs from October 1 to September 30 and is labeled according to the calendar
year in which it ends. correct answersfiscal year
Persistent budget deficits have long-run consequences because they lead to an increase in
_______________.
This may "crowd out" investment spending, which reduces long-run economic growth. correct
answerspublic debt
And in extreme cases, ________ may lead to government default, resulting in economic and
financial turmoil. correct answersrising debt
A widely used measure of fiscal health is the ____________; This number can remain stable or
fall even in the face of moderate budget deficits if GDP rises over time. correct answersdebt-
GDP ratio.
_____________ are spending promises made by governments that are effectively a debt despite
the fact that they are not included in the usual debt statistics.
The largest ____________ of the US government are Social Security, Medicare, and Medicaid.
correct answersImplicit liabilities
Monetary policy attempts to affect the overall level of spending in the economy by changes in:
correct answersinterest rates and the quantity of money.
Monetary policy involves correct answerschanges in the quantity of money.
The economic policy of changing the quantity of money to influence the interest rate and affect
overall spending in the economy, is known as: correct answersmonetary policy.
Changes in interest rates and the money supply in an effort to change overall spending in an
economy is: correct answersmonetary policy.
The Federal Reserve is able to have an impact on financial crises because the Fed: correct
answersconducts monetary policy.
A sale of bonds by the Fed: correct answersraises interest rates and reduces the money supply.
Suppose the Fed buys bonds. We can expect this transaction to: correct answersincrease the
money supply, increase bond prices, and decrease interest rates.
