ECO202: Exam 3 Practice Questions Chapters 15, 16, 17, & 18

If asked about the basic functioning of the economy, a classical economist would claim that

• The gov’t plays a vital role in keeping the economy healthy

• The short run is more significant than the long run

• The market naturally tends toward stability and full employment

• Inflation and unemployment reinforce each other

Which of the following economic statements would a Keynesian economist tend to support?

• Gov’t intervention in the economy is unnecessary

• The economy tends to be stable and at full employment

• The key determinant of economic growth is LRAS

• The short run deserves more attention than the long run

Mandatory outlays are different from discretionary outlays, because

• Mandatory outlays usually change during the budget process, whereas discretionary outlays do not

• Mandatory outlays have been decreasing as a percentage of the federal budget, whereas discretionary outlays have been increasing as a percentage of the federal budget

• Discretionary outlays include entitlement programs (such as Social Security and Medicare), whereas mandatory outlays include important government programs (such as defense)

• Discretionary outlays can be changed during the annual budget process, whereas mandatory outlays cannot

Which of the following is part of mandatory outlays?

• Social Security

• Defense spending

• Gov’t employee salaries

• Infrastructure (roads, bridges,...) maintenance

Social Security and Medicare spending continue to grow and take up larger shares of the
federal budget because life expectancy is __________, the number of people receiving
benefits is __________ quickly, and the growth in the number of people paying into the
programs is __________.

• increasing; increasing; decreasing

• increasing; increasing; increasing

• decreasing; increasing; decreasing

• decreasing; decreasing; increasing

Which of the following is NOT a revenue source for the U.S. federal gov’t?

• Medicare taxes

• Taxes on imported goods

• Federal income taxes

• County property taxes

Income taxes in the U.S. can be described as

• Flat

• Regressive

• Progressive

• U-shaped

Which of the following is FALSE regarding deficits?

• Deficits grow when outlays increase

• Deficits grow when revenues increase

• Deficits tend to grow during recessions

• Recent U.S. budget deficits are large in a historical context

Which of the following is true?

• The U.S. generally has a budget surplus

• National debt is the same as deficit

• A deficit will occur when revenues exceed outlays

• The national debt is the sum of yearly budget deficits

When the gov’t increases spending or decreases taxes to stimulate the economy and to increase real GDP, the gov’t is implementing policy

• Contractionary fiscal

• Contractionary monetary

• Expansionary monetary

• Expansionary fiscal