ECO 372T Wk 5 - Practice: Fiscal and Monetary Policy Quiz

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ECO 372T Wk 5 - Practice: Fiscal and Monetary Policy Quiz

For each of the following scenarios, determine which time lag is most likely to result when designing and implementing fiscal policy.

Recognition lag

Legislative lag

Implementation lag

All of these lags

Recognition lag

Legislative lag

Implementation lag

All of these lags

Recognition lag

Legislative lag

Implementation lag

All of these lags

The existence of lags in designing and implementing fiscal policy helps illustrate some of the limitations of fiscal policy aimed at easing the burdens of a recession.

Which of the following statements best describes a situation when fiscal policy is more appropriate?

The economy is quick to self- but the recession is very severe.

The implementation lag is shorter than the recognition and legislative lags.

Fiscal policy favors tax cuts instead of increased government purchases since this removes the legislative lag.

The economy is slow to self- or the recession is very severe.

A key feature of all automatic stabilizers is that they:

involve transfer payments.

require new legislation.

involve existing legislation.

are aimed at expanding the economy.

Which of the following is an example of built-in stability? As real GDP decreases,

Multiple Choice

income tax revenues increase and transfer payments decrease.

income tax revenues and transfer payments both increase.

income tax revenues decrease and transfer payments increase.

income tax revenues and transfer payments both decrease.

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that

Multiple Choice

reinforce changes in GDP.

produce a dynamically-adjusted budget.

help offset changes in GDP.

produce a standardized budget.

If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n)

Multiple Choice

expansionary fiscal policy.

contractionary fiscal policy.

nondiscretionary fiscal policy.

supply-side fiscal policy.

If the government wishes to increase the level of real GDP, it might reduce

Multiple Choice

its purchases of goods and services.

the size of the budget deficit.

transfer payments.

The lag between the time that the need for fiscal action is recognized and the time action is actually taken is referred to as the

Multiple Choice

recognition lag.

legislative lag.

spending lag.

implementation lag.

Which of the following serves as an automatic stabilizer in the economy?

Multiple Choice

the progressive income tax

exchange rates

the inflation rate

interest rates

When the federal government changes purchases and/or taxes to stimulate the economy or rein in inflation, such policy is

Multiple Choice

discretionary fiscal policy.

active monetary policy.

automatic fiscal policy.

active federal policy.

The intent of contractionary fiscal policy is to

Multiple Choice

decrease aggregate supply.

increase aggregate supply.

increase aggregate demand.

decrease aggregate demand.