EC202AdditionalPracticeMCQsForFinal

EC202AdditionalPracticeMCQsForFinal - EC202D1 Additional...

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EC202D1 Additional Practice MCQs For Final Exam With Answer Key Spring 2010 1. An increase in the elderly population of a country affects fiscal policy most directly because: A) the elderly generally are not required to pay taxes. B) governments provide pensions and health care for the elderly. C) the elderly favor high interest rates on their savings. D) governments spend more on education as the proportion of the elderly increases. 2. In a time of inflation when the real (i.e., deflated) value of the government debt is constant, then the conventionally: A) reported government budget will show a deficit equal to the inflation rate times the outstanding debt. B) reported government budget will show a deficit equal to less than the inflation rate times the outstanding debt. C) reported government budget will be balanced. D) measured government budget will show a surplus equal to the inflation rate times the outstanding debt. 3. A deficit adjusted for inflation should include only government spending to pay _____ interest payments. A) real B) nominal C) foreign D) domestic 4. Current measures of the U.S. federal government's budget deficit account for all of the following except : A) government expenditures. B) government revenues. C) changes in government indebtedness. D) changes in government capital assets. 5. According to the traditional view, if taxes are cut without cutting government spending, then the long-run effects will be ______ capital and ______ consumption. A) higher; higher B) lower; lower C) higher; lower D) lower; higher Page 1
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6. According to the traditional view (as in the IS–LM model), if taxes are cut without cutting government spending, then in the short run interest rates will ______ and investment will ______. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase 7. A debt-financed tax cut will ______ current consumption in the traditional view and ______ current consumption in the view of Ricardian equivalence. A) increase; increase B) increase; decrease C) increase; not change D) decrease; decrease 8. The Ricardian view on fiscal policy makes less sense if people are: A) rational and foresighted. B) shortsighted and not fully rational. C) able to plan for the future. D) able to borrow without constraint. 9. One reason for
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This note was uploaded on 10/25/2010 for the course EC EC202 taught by Professor Abdullah during the Spring '10 term at BU.

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EC202AdditionalPracticeMCQsForFinal - EC202D1 Additional...

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