Economics Answers

How do entitlement programs affect the creation of the federal budget?

a. Their funding is dictated by law, so policy-makers cannot change spending on them.
b. They provide flexibility for policy-makers so that they can more easily increase discretionary spending.
c. They are frequently cut during budget negotiations between the President and Congress.
d. They are not part of the federal budget and so have no impact on creation of it.

What kind of government budget best reflects an expansionary fiscal policy?

a. a budget that decreases government spending and increases taxes
b. a budget that decreases government spending and reduces taxes
c. a budget that increases government spending and increases taxes
d. a budget that increases government spending and reduces taxes

Which explains the role of the federal budget in fiscal policy?

a. It sets targets for businesses so that they know what to charge and spend in the upcoming year.
b. It helps prevent government from accidentally pursuing a contractionary policy.
c. It estimates government revenue and authorizes government spending for each year.
d. It places limits on the spending plans approved by Congress.

Fiscal policy is the use of government spending and revenue to influence

a. the economy
b. politicians
c. businesses
d. voters

How did President Reagan apply supply-side economics to promote economic recovery in the 1980s?

a. through a stimulus package
b. through increased spending
c. through a tax cut
d. through printing money

Whose economic ideas and beliefs most closely match this statement: "Let the free enterprise system solve economic problems, not the government"?

a. Milton Friedman
b. Franklin Roosevelt
c. John Maynard Keynes
d. John Kenneth Galbraith

When John Maynard Keynes said, "In the long run we are all dead," what serious economic point was he making?

a. People with limited savings could not afford to wait for the market, on its own, to restore equilibrium.
b. Classical economists did not care enough about people to promote government intervention in the economy.
c. A deep recession could continue for so long that everyone who was alive at the start of it would be dead by the time it ended.
d. Classical economics, with its outmoded ideas, was as good as dead in the new era of demand-side economics.

How might lowering income taxes during an economic downturn decrease the national debt?

a. by weakening the economy, decreasing revenues, and increasing the deficit
b. by weakening the economy, decreasing revenues, and decreasing the deficit
c. by stimulating the economy, increasing revenues, and decreasing the deficit
d. by stimulating the economy, decreasing revenues, and increasing the deficit

Which of the following is considered a problem associated with a large national debt?

a. little demand for government bonds
b. low interest rates
c. hyperinflation
d. foreign ownership of debt

Why might it be a bad idea to create money to cover budget deficits?

a. It can increase the national debt.
b. It can cause deflation.
c. it can cause inflation.
d. It can slow down the economy.