A government that currently has a budget deficit can balance its budget by ____________________.

decreasing tax revenues by more than it increases expenditures
decreasing tax revenues by more than it decreases expenditures
increasing tax revenues by more than it increases expenditures
increasing both tax revenues and expenditures by the same amount

Since 1980, the largest item of government expenditure has been ___________.

debt interest
purchases of goods and services
transfer payments
debt reduction

In a closed economy in which all taxes are lump-sum taxes and the price level is fixed, the lump-sum tax multiplier is equal to __________________________.

MPC/(1 - MPC)
-MPC/(1 + MPC)
-MPC/(1 - MPC)
MPC/(1 + MPC)

Spending on programs that result in transfer payments that depend on the economic well being of individuals and businesses is called ______________.

business subsidies
transfer spending
entitlement spending
welfare

An automatic stabilizer is at work if as real GDP increases, _____________.

tax revenues decrease and interest rates increase
transfer payments decrease and interest rates decrease
tax revenues increase and transfer payments decrease
transfer payments increase and tax revenues decrease

A cyclical deficit is a deficit that exists ___________.

only during a recession
even if the economy is at full employment
only because real GDP is less than potential GDP
during a business cycle expansion

When an economy is below full-employment and the government has a budget deficit, that deficit ___________.

is equal to the structural deficit
is equal to the structural deficit minus the cyclical deficit
exceeds the structural deficit
is equal to the cyclical deficit minus the structural deficit

An increase in government purchases of goods and services is an example of _____________.

contractionary fiscal policy
increasing induced taxes
expansionary fiscal policy
increasing structural deficit

Contractionary fiscal policy _______ aggregate demand and in the short run _______________ real GDP.

decreases; increases
increases; increases
decreases; decreases
increases; decreases

If the supply-side effect of a cut in taxes is less than the demand-side effect, then real GDP ___________ and the price level ___________.

decreases; decreases
increases; decreases
increases; increases
decreases; increases

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