Q1. Which of the following statements best explains the importance of the timing of changes in discretionary fiscal policy? Changes in discretionary fiscal policy must be timed properly if they are going to:

A)   help the government achieve a balanced budget.

B)   exert a stabilizing influence on an economy.

C)   enable the government to control the money supply.

Q2. Which of the following statements about achieving proper timing in fiscal policy is least accurate?

A)   There is usually a time lag between when a change in policy is needed and when the need is recognized by policy makers.

B)   Policy errors are inevitable due to unpredictable events.

C)   Improvements in quantitative methods have made the occurrence of recessions or expansions quite predictable.

Q3. Proper timing of fiscal policy is important if the government is to:

A)   creating the supply of money needed to promote full employment, price stability, and rapid economic growth.

B)   stimulate economic activity during a recession and restrain the economy during an inflationary boom.

C)   generating revenues from taxes and sales equal to its expenditures.

Q4. When an economy dips into a recession, automatic stabilizers will tend to alter government spending and taxation so as to:

A)   reduce interest rates, thus stimulating aggregate demand.

B)   reduce the budget deficit (or increase the surplus).

C)   enlarge the budget deficit (or reduce the surplus).

Q5. The term "automatic stabilizers" refers to the fact that:

A)   legislators automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity.

B)   with given tax rates and expenditure policies, a rise in national income tends to produce a surplus, while a decline tends to result in a deficit.

C)   government expenditures and tax receipts automatically balance over the course of the business cycle, although they may be out of balance in any single year.

答案和详解如下：

Q1. Which of the following statements best explains the importance of the timing of changes in discretionary fiscal policy? Changes in discretionary fiscal policy must be timed properly if they are going to:

A)   help the government achieve a balanced budget.

B)   exert a stabilizing influence on an economy.

C)   enable the government to control the money supply.

Correct answer is B)

Proper timing of discretional policy is needed to reduce economic instability. If timed incorrectly, the fiscal policy change could increase rather than reduce economic instability.

Q2. Which of the following statements about achieving proper timing in fiscal policy is least accurate?

A)   There is usually a time lag between when a change in policy is needed and when the need is recognized by policy makers.

B)   Policy errors are inevitable due to unpredictable events.

C)   Improvements in quantitative methods have made the occurrence of recessions or expansions quite predictable.

Correct answer is C)

One problem in achieving proper timing in fiscal policy is the inability to accurately predict a recession or expansion.

Q3. Proper timing of fiscal policy is important if the government is to:

A)   creating the supply of money needed to promote full employment, price stability, and rapid economic growth.

B)   stimulate economic activity during a recession and restrain the economy during an inflationary boom.

C)   generating revenues from taxes and sales equal to its expenditures.

Correct answer is B)

If fiscal policy is going to reduce economic instability, changes in policy must stimulate the economy during a recession and restrain it during an inflationary boom.

Q4. When an economy dips into a recession, automatic stabilizers will tend to alter government spending and taxation so as to:

A)   reduce interest rates, thus stimulating aggregate demand.

B)   reduce the budget deficit (or increase the surplus).

C)   enlarge the budget deficit (or reduce the surplus).

Correct answer is C)

During a recession unemployment is high, so the government will pay out more in unemployment compensation at the exact time that tax receipts from corporations and individuals are low. This will increase the size of the deficit and also maintain aggregate demand during recessionary periods.

Q5. The term "automatic stabilizers" refers to the fact that:

A)   legislators automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity.

B)   with given tax rates and expenditure policies, a rise in national income tends to produce a surplus, while a decline tends to result in a deficit.

C)   government expenditures and tax receipts automatically balance over the course of the business cycle, although they may be out of balance in any single year.

Correct answer is B)

Automatic stabilizers are built-in fiscal devices that ensure deficits in a recession and surpluses during booms. Automatic stabilizers minimize the problem of proper timing.

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