CFA 14.1

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Policies used with the goal of maintaining stable prices and producing economic growth include:

fiscal policy only.

both fiscal and monetary policy. (correct)

monetary policy only.

Wrong Answer

Discretionary fiscal policy refers to:

buying or selling securities in the open market to influence interest rates.

active decisions regarding spending and taxation to affect economic growth. (correct)

government spending programs that counteract the business cycle without the intervention of policymakers.

Wrong Answer

An argument against being concerned with the size of a fiscal deficit is that a deficit can:

cause government borrowing to crowd out private borrowing.

lead to higher future taxes that will increase government revenues.

aid in increasing GDP and employment if the economy is operating at less than potential GDP. (correct)

Wrong Answer

Policies that can be used as tools for redistribution of wealth and income include:

fiscal policy only. Signup and view all the answers

Which of the following statements best explains how automatic stabilizers work? Even without a change in fiscal policy, automatic stabilizers tend to promote:

a budget deficit during a recession and a budget surplus during an inflationary expansion. Signup and view all the answers

Monetary policy is most accurately described as actions that influence economic activity by increasing or decreasing:

the supply of money and credit. Signup and view all the answers

When the central bank increases short-term interest rates, its monetary policy is best described as:

contractionary. Signup and view all the answers

Arguments against being concerned about the size of a fiscal deficit include:

Ricardian equivalence. Signup and view all the answers

The crowding-out effect suggests that:

greater government deficits will drive up interest rates, thereby reducing private investment. Signup and view all the answers

A distinction between fiscal policy and monetary policy is that fiscal policy:

concerns taxes and government spending, while monetary policy concerns the money supply. Signup and view all the answers

The term "automatic stabilizers" refers to:

increases in transfer payments and decreases in tax revenues that result from an economic contraction without new legislation. Signup and view all the answers

The crowding-out model implies that a:

budget deficit will increase the real interest rate and thereby retard private investment. Signup and view all the answers

Promoting economic growth and price stability are the goals of:

both fiscal and monetary policy. Signup and view all the answers

Arguments for being concerned with the size of a fiscal deficit relative to GDP least likely include:

a high proportion of government debt owed to the country's citizens. Signup and view all the answers

When an economy dips into a recession, automatic stabilizers will tend to alter government spending and taxation so as to:

enlarge the budget deficit (or reduce the surplus). Signup and view all the answers

Attempting to influence economic growth and inflation by changing tax rates and government spending is best described as:

fiscal policy. Signup and view all the answers

Unemployment compensation is an example of:

an automatic fiscal policy stabilizer. Signup and view all the answers

Arguments for being concerned about the size of a fiscal deficit least likely include:

Ricardian equivalence. Signup and view all the answers

CFA 14.1

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Questions and Answers

Policies used with the goal of maintaining stable prices and producing economic growth include:

Discretionary fiscal policy refers to:

An argument against being concerned with the size of a fiscal deficit is that a deficit can:

Policies that can be used as tools for redistribution of wealth and income include:

Which of the following statements best explains how automatic stabilizers work? Even without a change in fiscal policy, automatic stabilizers tend to promote:

Monetary policy is most accurately described as actions that influence economic activity by increasing or decreasing:

When the central bank increases short-term interest rates, its monetary policy is best described as:

Arguments against being concerned about the size of a fiscal deficit include:

The crowding-out effect suggests that:

A distinction between fiscal policy and monetary policy is that fiscal policy:

The term "automatic stabilizers" refers to:

The crowding-out model implies that a:

Promoting economic growth and price stability are the goals of:

Arguments for being concerned with the size of a fiscal deficit relative to GDP least likely include:

When an economy dips into a recession, automatic stabilizers will tend to alter government spending and taxation so as to:

Attempting to influence economic growth and inflation by changing tax rates and government spending is best described as:

Unemployment compensation is an example of:

Arguments for being concerned about the size of a fiscal deficit least likely include:

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