Federal deficits amounted to 3.5 percent of the U.S. GDP by 2003 because of:
a. the global financial crisis of 2002 that increased the rate of unemployment.
b. an increase in the cost of fighting the war against terrorism.
c. an improving stock market that decreased interest payment burdens for the government.
d. a decrease in military and defense spending due to the end of the war in Iraq.
e. an increase in welfare spending and Medicare expenses.
QUESTION 2If the official unemployment rate increases from February to March because of sluggish sales in the automobile industry, then the increase can be blamed on:
a. seasonal unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
e. underemployment.
QUESTION 3Which of the following might increase the supply curve of labor?
a. Elimination of discrimination against blacks.
b. Elimination of discrimination against females.
c. Easing licensing requirements.
d. All of these.
QUESTION 4Which of the following statements is true?
a. Federal budget deficits became progressively smaller during the 1990s and turned into a surplus by 1998.
b. Federal spending declined relative to GDP, while federal revenues rose relative to GDP during the 1980s.
c. Functional finance says that policy makers should be concerned less with the economy's potential output and more with balancing the budget annually.
d. A disadvantage of functional finance is that it increases the level of unemployment during recessions.
e. A disadvantage of annual financed budget is that it dampens swings in the business cycle without increasing the national debt.
QUESTION 5Cyclical unemployment results from:
a. a mismatch of skills.
b. being in the wrong geographical location.
c. monetary cost and the time it takes to find the best job.
d. seasonal decreases in demand for labor.
e. prolonged declines in business activity.
QUESTION 6If there is employment discrimination against minorities, this will cause the:
a. supply of their services to increase, and their wages to fall.
b. demand for their services to decline, and their wages to fall.
c. supply of their services to decline, and their wages to rise.
d. demand for their services to decline, and their wages to rise.
QUESTION 7In 1981, U.S. policy makers predicted a balanced budget as:
a. the budget included a decrease in defense expenditures.
b. the budget included an increase in the tax rate.
c. the budget included an increase in unspecified government spending.
d. the growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut.
e. the growth in GDP was expected to be small enough to require less government spending.
QUESTION 8A negative income tax system would provide all households, including the poor, with:
a. cash payments.
b. incentives to earn income.
c. higher income levels.
d. medical assistance.
e. lower tax bills than it does .
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