10.The meaning of the quotation, \"Every government has a fiscal policy, whether
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Question
10.The meaning of the quotation, "Every government has a fiscal policy, whether it realizes if or not," is best expressed by which of the following statements?
Every government must decide on a tax and expenditure program, and this will influence the economy and the components of GDP.
In many cases, decisions to spend money must be made even though the expenditure runs contrary to the policy indicated.
Every government must make decisions about the quantity of money in the economy, and this will influence credit conditions and the rate of interest.
Every government is forced to do something about recessions and inflation, whether it wants to or not.
11. "A $7.7 billion tax cut was accompnaied by a $9 billion increase in consumer spending in the same year." The most probable reason why consumer spending increased by more than taxes is that:
the tax cut induced more transfer payments which in turn caused consumer spending by others.
lower taxes required lower government spending which in turn encouraged private spending by others.
the tax cut reduced interest rates which in turn stimulated borrowing by others.
spending by those with higher take-home pay in turn generated additional production and spending by others.
12. "Unemployment last month was 4.8 percent of the work force, a slight reduction from the previous month. For the past 15 months, unemployment has been under 5 percent of the work force. Consumer prices last month increased by two-tenths of a percent-a total gain of 2 percent over the level of one year ago. Total production of goods and services is projected to be 5 percent higher this year than last year."
Which of the following policies would be the most appropriate for short-run stabilization objectives?
relying on automatic stabilizers.
passing new corporate tax incentives to encourage investment.
increasing the minimum wage and expanding the number of jobs covered by these laws.
increasing both personal and corporate income taxes.
14. Fiscal policy advisor Jones wants to increase aggregate demand while monetary policy advisor Smith wants to reduce aggregate demand. Which of the following combinations of fiscal and monetary policies would there two advisors suggest to achieve their conflicting goals.
tax decreases, open market purchases of bonds by the Federal Reserve.
government spending decreases, an increase in the reserve requirements for commercial banks.
tax decreases, open market sales of bonds by the Federal Reserve.
equal decreases in taxes and government spending; an increase in the Federal Reserve's discount rate.
15. "I have promised to do everything in my power to reduce the federal deficit. That means reduced federal expenditures and, if necessary, increasing taxes. Under present conditions of full emplyment and steady prices, we can afford to bear the burden of this debt now instead of passing it on to our children and grandchildren."
If the policies of the Senator quoted above were adopted. what effect would be expectedwhile these policies were being implimented?
higher inflation
higher rates of economic growth
increased unemployment and idle capacity
increased imports
Explanation / Answer
10.The meaning of the quotation, "Every government has a fiscal policy, whether it realizes if or not," is best expressed by which of the following statements?
Every government is forced to do something about recessions and inflation, whether it wants to or not.
11. "A $7.7 billion tax cut was accompnaied by a $9 billion increase in consumer spending in the same year." The most probable reason why consumer spending increased by more than taxes is that:
spending by those with higher take-home pay in turn generated additional production and spending by others.
12. "Unemployment last month was 4.8 percent of the work force, a slight reduction from the previous month. For the past 15 months, unemployment has been under 5 percent of the work force. Consumer prices last month increased by two-tenths of a percent-a total gain of 2 percent over the level of one year ago. Total production of goods and services is projected to be 5 percent higher this year than last year."
Which of the following policies would be the most appropriate for short-run stabilization objectives?
relying on automatic stabilizers.
14. Fiscal policy advisor Jones wants to increase aggregate demand while monetary policy advisor Smith wants to reduce aggregate demand. Which of the following combinations of fiscal and monetary policies would there two advisors suggest to achieve their conflicting goals.
equal decreases in taxes and government spending; an increase in the Federal Reserve's discount rate.
15. "I have promised to do everything in my power to reduce the federal deficit. That means reduced federal expenditures and, if necessary, increasing taxes. Under present conditions of full emplyment and steady prices, we can afford to bear the burden of this debt now instead of passing it on to our children and grandchildren."
If the policies of the Senator quoted above were adopted. what effect would be expectedwhile these policies were being implimented?
increased unemployment and idle capacity
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