13. The crowding-out effect suggests that: a. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. b. increases in government spending financed through borrowing raise the interest rate and reduce private investment. c. the American dollar replaces other currencies in transactions around the world. d. consumer and investment spending always vary inversely. 14. Expansionary fiscal policy is so named because it: a) expands beyond national borders b) necessarily expands the size of government and simultaneously the nation's money supply. c) is aimed at achieving greater price stability. d) is aimed at increasing aggregate demand and thus expanding real GDP. 15. A budget deficit means that: a. b. C. d. 16. Discretionary fiscal policy will stabilize the economy most when: a. deficits are incurred during inflations and surpluses during recessions. b. deficits are incurred during recessions and surpluses during inflations. Federal government assets are less than liabilities. government expenditures are falling and revenues are rising. government revenues are greater than expenditures in a given year. government expenditures are greater than revenues in a given year. 17. Rising budget deficit signals that the government is engaging in a(n) a. balanced budget b. contractionary c. expansionary 18. A tax whose average rate increases as the amount taxed increases is: a. progressive b. aggressive c. congressive 19. One of the potential problems with the public debt is that it may: a. make income distribution more equitable. b. increase the debt burden of foreign creditors. A) B) C) D) c. budget is balanced each year. d. budget surpluses are always incurred. 20. One reason the public debt will not bankrupt the Federal government is that the: a. debt can be refinanced by selling new bonds. b. cost is shifted to future generations who would not care. fiscal policy: d. unreasonable d. regressive 21. Which combination of factors would most likely increase aggregate demand in the U.S.? an increase in consumer wealth and a decrease in interest rates c. lead to higher taxes in the future. d. decrease interest rates. 24. A checkable deposit at a commercial bank is a(n): a. liability to the depositor and an asset to the bank. b. liability to both the depositor and the bank. e. depressive c. foreigners bear the cost of the debt d. debt has a positive effect on the economy. an increase in income taxes and a decrease in foreign demand for U.S. products an increase in personal taxes and a decrease in government spending an increase in business taxes and a decrease in profit expectations. 22. When the US economy is in recession, which of the fiscal policies would be government adopt? a reduction in food subsidies and/or veterans' benefits and/or an increase in corporate tax b. high import tariffs to stop exporting jobs to lower wage countries c. reduction in Federal tax rates on personal income and/or an increase in government spending d. an increase in sales taxes and/or a postponement of a highway construction program 23. The Federal Reserve System's four monetary policy goals are A) low government budget deficits, low current account deficits, high employment, and a strong dollar. B) low rate of bank failures, high reserve ratios, price stability, and economic growth. C) price stability, high employment, economic growth, and stability of financial markets and institutions. D) price stability, low government budget deficits, low current account deficits, and low rate of bank failures. c. asset to the depositor and a liability to the bank. d. asset to both the depositor and the bank.