Question

1. Countercyclical fiscal policy consists of:

a. using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of recession.

b. using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of expansion.

c. using expansionary fiscal policy during times of expansion and contractionary fiscal policy during times of recession.

d. using expansionary fiscal policy during times of expansion and contractionary fiscal policy during times of expansion.

e. using expansionary fiscal policy and contractionary fiscal policy at the same time.

2. A recognition lag happens because:

a. it is difficult to recognize what the unemployment rate is.

b. in most nations, one or more governing bodies must approve government spending or new tax policies.

c. it takes time for the complete effects of monetary and fiscal policy to materialize.

d. it is difficult to determine when the economy is turning up or down.

e. it takes time to recognize the true long-run growth rate in the economy. T

3. The current tax rate for Social Security is:

a. 1.45% for the employee and 1.45% for the employer, if not self-employed.

b. 7.65%, if self-employed.

c. 7.65% for the employee and 7.65% for the employer, if not self-employed.

d. 6.2% for the employee and 6.2% for the employer, if not self-employed.

e. 12.4%, if self-employed.

4. Mandatory outlays are different than discretionary outlays because:

a. mandatory outlays usually change during the budget process, whereas discretionary outlays do not.

b. mandatory outlays have been decreasing as a percentage of the federal budget, whereas discretionary outlays have been increasing as a percentage of the federal budget.

c. discretionary outlays can be changed during the annual budget process, whereas mandatory outlays cannot.

d. discretionary outlays include entitlement programs (such as Social Security and Medicare), whereas mandatory outlays include important government programs (such as defense).

e. discretionary outlays comprise the vast majority of the total budget, whereas mandatory outlays make up only a minor fraction.

Answer 1

1. Countercyclical fiscal policy consists of:

b. using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of expansion.

2. A recognition lag happens because:

d. it is difficult to determine when the economy is turning up or down.

3. The current tax rate for Social Security is:

d. 6.2% for the employee and 6.2% for the employer, if not self-employed.

4. Mandatory outlays are different than discretionary outlays because:

c. discretionary outlays can be changed during the annual budget process, whereas mandatory outlays cannot.