1. Regarding the economy, what are the terms expand and contract generally used to describe?
a. Changes in monetary and fiscal policy
b. Rising and falling levels of budget deficits and debt
c. Fluctuations in the economy
d. Changes in tax revenues
2. Which of the following best defines government revenue?
a. Government programs designed to improve economic equity
b. Income the government receives from taxes and other nontax sources
c. Money the government spends to buy goods and services
d. A tax for which high-income earners pay a larger fraction of their income in taxes than low-income earners
3. During a contractionary phase of the business cycle, which of the following most likely occurs?
a. More tax revenues are remitted
b. More goods and services are produced
c. Fewer people are unemployed
d. Fewer people are employed
4. If data indicate the economy is in recession and members of Congress are working to pass legislation to encourage economic growth, which of the following has almost certainly occurred?
a. Realization of results
b. Recognition of change in the economy
c. Implementation of policy
d. Analysis of policy's effectiveness
5. Which of the following is an automatic stabilizer in the economy?
a. Spending on national defense
b. Provision of unemployment compensation
c. Spending on education
d. Provision of Social Security and Medicare
6. Which of the following is the definition of government expenditures?
a. Money the government spends to buy goods and services
b. An itemized summary of probable government revenue and expenses for a given period
c. Central bank actions using interest rate or money supply tools to achieve goals such as stable prices, maximum employment, and moderate long-term interest rates
d. The total market value, expressed in dollars, of all final goods and services produced in an economy in a given year
7. If government is increasing spending and decreasing taxes, what type of policy is it conducting?
a. Expansionary monetary policy
b. Contractionary monetary policy
c. Contractionary fiscal policy
d. Expansionary fiscal policy
8. To calculate real gross domestic product (GDP), gross domestic product must be adjusted for which variable?
a. Population
b. Inflation
c. Deficit
d. Debt
9. Which of the following is a severe and long-lasting economic downturn that is worse and deeper than a recession?
a. A contraction
b. The business cycle
c. An expansion
d. A depression
10. Congress might lower taxes if the economy appears to be in
a. a period of expansion.
b. a recessionary period.
c. a period of increased employment.
d. a period of increasing GDP.
11. Which of the following best defines inflation?
a. The rapid increase in the price of a specific good, such as gasoline
b. A general, sustained upward movement of prices for goods and services in an economy
c. The fluctuation in revenue and expenditures caused by Congress and the president
d. An increase in the national debt caused by ongoing deficit spending
12. Which of the following is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment?
a. A business cycle
b. A recession
c. A bubble
d. A transfer program
13. Which of the following is true of active fiscal policy actions?
a. Policymakers can pinpoint the economic outcomes of their policies.
b. The political process makes it easy to pass needed actions in times of economic crisis.
c. Economic conditions will stay the same without policymaker action.
d. It is often difficult for policymakers to know whether policies had any impact on the economy.
14. If the unemployment rate is declining, the economy is likely experiencing which one of the following?
a. A recession
b. An expansion
c. A depression
d. A contraction