Questions and Answers
An accurate statement about achieving a balanced budget would be that
What is one important distinction between classical economics and Keynesian economics?
Classical economics teaches that free markets regulate themselves, and Keynesian economics teaches that government action affects the economy.
All of the following are characteristics of classical economics EXCEPT
The author of The General Theory of Employment, Interest, and Money was
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The purpose of expansionary fiscal policy is to
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Fiscal policy is carried out primarily by
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The crowding-out effect of expansionary fiscal policy suggests that
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All of the following are reasons why it is difficult to implement balanced fiscal policy EXCEPT
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Keynesian economics failed to deal successfully with
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In contrast with classical economics, Keynesian economics,
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The federal budget is put together
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How does the 'crowding-out effect' influence businesses?
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An example of expansionary fiscal policy would be
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How did economic events during WWII demonstrate the principles of Keynesian economics?
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A major advantage of the built-in or automatic stabilizers is that they
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All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT
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Supporters of supply-side economics believe that
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When revenues exceed expenditures
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Every hour, the federal government spends about
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All of the following people are well-known classical economists EXCEPT
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The political business cycle refers to the possibility that
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The national debt rose during Ronald Reagan's term as President for all of the following reasons EXCEPT
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When you buy a US Savings Bond, you
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An example of contractionary fiscal policy would be
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An example of an automatic stabilizer is
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All of the following are problems associated with high national debt EXCEPT that it
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The national debt of the US is in excess of
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The Office of Management and Budget
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Study Notes
Balanced Budget
- Most states require a balanced budget for their spending.
Economic Theories
- Classical economics believes that free markets self-regulate.
- Keynesian economics emphasizes the impact of government action on the economy.
- Classical economics features minimal government involvement in the economy, while Keynesian economics promotes government intervention.
Key Figures
- John Keynes authored "The General Theory of Employment, Interest, and Money," foundational to Keynesian economics.
Fiscal Policy
- Expansionary fiscal policy aims to increase economic output.
- Fiscal policy is primarily carried out by the Federal government.
- The federal budget is compiled by Congress and the White House.
- Expansionary fiscal policy examples include cutting taxes and increasing government spending.
Economic Effects
- The crowding-out effect occurs when government spending limits private investment opportunities.
- High inflation during the 1970s challenged Keynesian economics.
- The "crowding-out effect" makes borrowing harder for businesses due to increased government expenditures.
Stabilizers and Surplus
- Automatic stabilizers function without needing Congressional approval.
- A budget surplus exists when revenues exceed expenditures.
- Each hour, the federal government spends approximately $200 million.
National Debt
- The national debt exceeds 18.1 trillion dollars.
- Problems associated with high national debt do not include the risk of investing in treasury bonds.
- Notable classical economists do not include Arthur Laffer.
Political Influences
- The political business cycle suggests politicians may manipulate the economy for re-election advantages.
- The national debt rose during Ronald Reagan's presidency due to factors excluding war expenses.
Bonds and Contractionary Policy
- Purchasing a US Savings Bond equates to loaning money to the government.
- Contractionary fiscal policy includes decreasing government spending.
Automatic Stabilizers
- Automatic stabilizers include taxes, which adjust without legislative action in response to economic conditions.
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Description
Explore key concepts in economics with these flashcards from Chapter 15. Review the distinctions between classical and Keynesian economics and understand the importance of balanced budgets. Perfect for students looking to reinforce their knowledge in economic theory.