A government that currently has a budget deficit can balance its budget by ____________________.

increasing revenues by more than it increases outlays
increasing both revenues and outlays by the same amount
decreasing revenues by more than it increases outlays
decreasing revenues by more than it decreases outlays

Since 1980, the largest item of government outlays has been ___________.

expenditures on goods and services
transfer payments
debt interest
debt reduction

In a closed economy in which all taxes are autonomous and the price level is fixed, the autonomous tax multiplier is equal to __________________________.

-MPC/(1 - MPC)
MPC/(1 - MPC)
-MPC/(1 + MPC)
MPC/(1 + MPC)

If the price level remains fixed when the government changes its expenditures, the government expenditures multiplier is ____________.

equal to zero
positive
negative
equal to 1

An automatic stabilizer is at work if as real GDP increases, _____________.

tax revenues increase and transfer payments decrease
tax revenues decrease and interest rates increase
transfer payments decrease and interest rates decrease
transfer payments increase and tax revenues decrease

A cyclical deficit is a deficit that exists ___________.

even if the economy is at full employment
only because real GDP is less than potential GDP
only during a recession
during a business cycle expansion

When an economy is below full-employment and the government has a budget deficit, that deficit ___________.

exceeds the structural deficit
is equal to the structural deficit
is equal to the structural deficit minus the cyclical deficit
is equal to the cyclical deficit minus the structural deficit

An increase in government expenditures on goods and services is an example of _____________.

increasing induced taxes
expansionary fiscal policy
contractionary fiscal policy
increasing structural deficit

Contractionary fiscal policy _______ aggregate demand and in the short run _______________ real GDP.

decreases; decreases
decreases; increases
increases; increases
increases; decreases

If the supply-side effect of a cut in taxes is less than the demand-side effect, then real GDP ___________ and the price level ___________.

increases; decreases
increases; increases
decreases; decreases
decreases; increases

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