Name:     ID: 
 
Email: 

Ch 15: Fiscal Policy

Matching
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
appropriations bill
f.
national debt
b.
crowding-out effect
g.
productive capacity
c.
federal budget
h.
Treasury bill
d.
fiscal policy
i.
Treasury bond
e.
multiplier effect
j.
Treasury note
 

 1. 

 the maximum output that an economy can sustain over a period of time
 

 2. 

 a written document indicating the amount of money the government expects to receive for a certain year and authorizing the amount of money the government can spend that year
 

 3. 

 the idea that every one dollar change in fiscal policy creates a greater than one dollar change in the national income
 

 4. 

 federal government’s use of taxing and spending to keep the economy stable
 

 5. 

 a type of short-term bond that must be repaid within a year or less
 

 6. 

 a type of bond that the issuer may take as long as 30 years to repay
 

 7. 

 when the level of federal borrowing makes it more difficult for private businesses to borrow
 

 8. 

 total amount of money the federal government owes
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 9. 
Every hour, the federal government spends about
a.
$250 thousand.
c.
$250 million.
b.
$25 million.
d.
$25 billion.
 

 10. 
The federal budget is put together
a.
every other year.
b.
by Congress and the White House.
c.
to report to Congress on the preceding year’s expenditures.
d.
in order to reimburse state governments for costs of federally funded programs.
 

 11. 
An example of expansionary fiscal policy would be
a.
cutting taxes.
c.
cutting production of consumer goods.
b.
cutting government spending.
d.
cutting prices of consumer goods.
 

 12. 
All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT
a.
the need for discretionary spending.
b.
political pressures for reelection.
c.
difficulty of predicting future economic performance.
d.
difficulty of coordinating the needs of many different agencies.
 

 13. 
All of the following people are well-known classical economists EXCEPT
a.
Adam Smith.
c.
Arthur Laffer.
b.
David Ricardo.
d.
Thomas Malthus.
 

 14. 
In contrast with classical economics, Keynesian economics
a.
reduces the role of government.
b.
takes a broader view of the economy.
c.
relies more heavily on the laws of supply and demand.
d.
more strongly emphasizes the importance of individual businesses to the overall health of the economy.
 

 15. 
When revenues exceed expenditures,
a.
there is a budget surplus.
b.
there is a budget deficit.
c.
the government must create more money.
d.
the government is forced to issue more bonds to raise money.
 

 16. 
When you buy a United States Savings Bond, you
a.
loan money to the government.
b.
borrow money from a savings and loan association.
c.
donate money for special government projects.
d.
pay for your child’s college education.
 

 17. 
Keynesian economics failed to deal successfully with
a.
World War II.
b.
the Great Depression.
c.
high inflation during the 1970s.
d.
low unemployment rate during the 1960s.
 

 18. 
The national debt rose during Ronald Reagan’s term as President for all of the following reasons EXCEPT
a.
tax cuts.
b.
the costs of running a war.
c.
increased funding for defense spending.
d.
an unexpected economic downturn.
 

Short Answer
 
 
Interpreting a Graph

nar001-1.jpg
 

 19. 
About what year was the budget deficit the highest?
 

 20. 
What was true about revenues and expenditures in 1950?
 

 21. 
What was the general trend of government revenues and expenditures during the early 1950s?
 

 22. 
About what year was the budget surplus about $40 billion?
 

Essay
 
 
Critical Thinking
 

 23. 
Synthesizing Information What office prepares the federal budget? Describe the process it follows.
 

 24. 
Making Comparisons How does supply-side economics differ from Keynesian economics?
 



 
         Start Over