1-) Which of the following is NOT an argument against the use ofexpansionary fiscal policy?

A. Government spending may crowd out private spending.
B. Government borrowing may crowd out private investmentspending.
C. Government borrowing may reduce the marginal propensity toconsume.
D. Government budget deficits may lead to reduced privatespending.

2-) Spending for Medicare and Medicaid accounts for what percentageof federal spending?
A. 10%
B. 20%
C. 30%
D. 40%

3-) Economists believe that the budget should be balanced eachfiscal year. Is this correct?
A. Yes, a budget should be balanced annually, otherwise persistentbudget deficits can cause havoc in the economy.
B. Yes, as the law states that both the federal and stategovernment budgets should always be balanced.
C. Yes, since the balanced budget multiplier is larger, hence itmakes the economy grow faster.
D. No, a budget should be balanced only on average; it can be in adeficit during a recession and offset by surpluses when the economyis doing well.

4-) If there is a recessionary gap in the economy, discretionaryfiscal policy would likely involve action to:
A. shift aggregate demand to the right.
B. shift aggregate demand to the left.
C. leave aggregate demand alone and shift aggregate supply to theleft.
D. shift aggregate demand to the right and shift aggregate supplyto the left.

5-) The multiplier effect of changes in government transfersis:

A. greater than the multiplier effect of a change in governmentspending.

B. zero because transfer payments do not have an effect onaggregate demand.

C. less than the multiplier effect of a change in governmentspending.

D. impossible to determine.