Chapter 15 Fiscal Policy

| November 9, 2018

5)
Which of the following is an example of government discretionary spending?
A)
Social Security retirement payments
B)
Medicare benefits for the elderly
C) defense spending
D)
net interest paid on government debt held by the public

6)
Spending on programs that ________, such as Social Security and Medicare, is
classified as entitlement and mandatory spending.
A)
is authorized by Congress on an annual basis
B)
has been authorized by prior law
C)
is authorized only in times of budget surpluses
D)
is authorized only in times of budget deficits

7)
Does the term “mandatory spending” mean that spending must go on
forever?
A)
Yes, once appropriated, spending is indefinite.
B)
No, once appropriated, spending is for the life of the program only or until it
changes.
C)
Yes, the laws which authorized this spending cannot be changed.
D)
Yes, Congress has no right to change these spending programs.

8)
Who sets the rules for entitlements when spending is authorized under this
category?
A)
the President
B)
the agency involved
C)
the Congress when it appropriates the spending
D)
each individual state

9)
What is the largest component of the federal budget?
A)
discretionary spending
B)
entitlements and mandatory spending
C)
net interest
D)
defense spending

10)
Entitlements and net interest are the ________ the U.S. federal budget.
A)
only two declining components of
B)
two fastest-growing components of
C)
two slowest-growing components of
D)
only two components with negative values in

11)
A White House proposal to increase infrastructure spending on roads, rail lines
and runways is an example of
A)
expansionary fiscal policy.
B)
contractionary fiscal policy.
C)
automatic stabilization.
D)
insourcing policies.

Recall
the Application about how society will cope with increased demands for
entitlement programs to answer the following question(s). This Application
addresses the impact of increasing life expectancy and aging populations on the
costs of government entitlement programs such as Social Security, Medicare and
Medicaid, and examines several possible solutions to the potential problem.

12)
Recall the application. Current spending on federal retirement and health
programs accounts for 10% of GDP. Experts estimate that this spending
component’s share of GDP ________ by the year 2075.
A)
is likely to shrink
B)
will more than double
C)
will remain constant
D)
will grow moderately initially then taper off

13)
Recall the application. In the year 2075, the portion of GDP devoted to
spending on Social Security, Medicare and Medicaid is expected to be
A)
significantly less than the share of GDP devoted to these programs today.
B)
roughly equal to the total amount of GDP today.
C)
larger than total federal spending’s share of GDP today.
D)
greater than the consumption spending component’s share of GDP in 2075.

14)
Recall the application. How will an increase in government spending on
entitlement programs affect the macroeconomy?
A)
It will increase aggregate demand.
B)
It will decrease aggregate demand.
C)
It will increase aggregate supply.
D)
It will decrease aggregate supply.

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