The Keynesian analysis of fiscal policy argues that:
a. fiscal policy should generally be expansionary except during periods of economic recession.
b. fiscal policy should generally be restrictive except during inflationary booms.
c. the federal budget should be balanced annually except during war.
d. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
QUESTION 2The impact of an increase in the money supply is a(n):
a. increase in the interest rate, which in turn stimulates investment and GDP.
b. decrease in the interest rate, which in turn stimulates investment and GDP.
c. reduction in the general level of prices, which will increase the disposable income of households.
d. improvement in technology, which will stimulate both output and employment.
QUESTION 3Which of the following statements would come from someone classified as unemployed?
a. I'm not working because I'm going to Jamaica with my buddy.
b. I haven't had a job in a year, and I stopped looking for a job nine months ago.
c. I'm a full-time student at the University of Illinois who doesn't have time to work.
d. I can't stand my current job as a telemarketer. I used to be a nuclear engineer.
e. I'm not working. I had three interviews this week, and I'm trying to find a job.
QUESTION 4Changes in government spending and/or taxes as the result of legislation is called:
a. open market operations of the Federal Reserve.
b. discretionary fiscal policy.
c. balanced budget operations.
d. discretionary monetary policy.
QUESTION 5An increase in the supply of money will:
a. reduce the rate of interest and, thereby, trigger an increase in current spending by households and businesses.
b. reduce aggregate demand and real output.
c. increase only the general level of prices.
d. lead to a higher rate of unemployment.
QUESTION 6A criticism of the unemployment rate is that:
a. underemployment is measured in the calculation.
b. the data includes part-time workers as fully employed.
c. discouraged workers are included in the calculation.
d. all of these are problems.
QUESTION 7When the federal government is running a budget deficit:
a. government tax revenues exceed government expenditures.
b. government expenditures exceed government tax revenues.
c. the economy must be in an economic recession.
d. the size of the national debt will decline.
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