Chapter 15 Fiscal Policy

15.3 Fiscal Policy in U.S. History

1) In the United States during the 1930s, politicians

A) relied on government spending and taxation to pull the economy out of the depression.

B) did not believe in using government spending and taxation because they feared the consequences of budget deficits.

C) knew that the depression would eventually subside because of automatic stabilizers.

D) deliberately relied on government spending and taxation even though they knew the depression would continue.

2) In the United States during the 1930s

A) government spending and taxes both increased, resulting in zero net fiscal expansion.

B) government spending and taxes both decreased, resulting in a net fiscal contraction.

C) government spending increased and taxes decreased, resulting in a fiscal expansion.

D) government spending decreased and taxes increased, resulting in a fiscal contraction.

3) In the United States, the use of fiscal policy tools to stabilize the economy gained prominence during

A) the depression era.

B) the Kennedy administration.

C) the Reagan administration.

D) the Clinton administration.

4) During the Kennedy administration, what did economist Walter Heller propose to bring the economy back to full employment?

A) a large government works program

B) insourcing

C) tax cuts

D) tariffs on imported goods

5) In the United States during the Vietnam War era, as military spending increased

A) unemployment dropped to very low levels.

B) both frictional and cyclical unemployment increased.

C) frictional unemployment dropped, but cyclical unemployment increased.

D) overall unemployment rates did not change.

6) Huge increases in government spending and record low levels of unemployment during the Vietnam War era in the late 1960s led policy makers to fear that

A) the economy was growing too fast, which would increase unemployment.

B) the economy was growing too fast, which would increase inflation.

C) the economy was slipping into a recession, which would increase unemployment.

D) the economy was slipping into a recession, which would increase inflation.

7) In the United States, the temporary tax surcharge of 1968

A) had no impact on consumer spending.

B) decreased consumer spending by less than was originally estimated.

C) decreased consumer spending by more than was originally estimated.

D) actually increased consumer spending.

8) Fearing that the economy was overheating, policymakers instituted a temporary tax surcharge in 1968. This temporary surtax

A) successfully reduced consumption sufficiently to cool down the economy.

B) reduced savings but had little effect on consumption.

C) drastically reduced both savings and consumption.

D) increased savings and reduced consumption.

9) The supply-side motivated tax cuts of 1981 during the Reagan administration were aimed at

A) increasing aggregate demand.

B) increasing aggregate supply.

C) decreasing aggregate supply.

D) balancing the federal budget.

10) Taxes can have an important effect on

A) the labor supply.

B) saving.

C) economic growth.

D) all of the above