Chapter 32 — Quiz

Q1. Automatic stabilizers include: a) Stimulus checks b) Progressive taxes and unemployment insurance c) QE d) Tariffs Q2. The fiscal multiplier measures: a) The total GDP effect of $1 of government spending b) The tax rate c) The debt-to-GDP ratio d) Inflation Q3. The multiplier is larger when: a) The economy is at full employment b) The economy is in a recession (idle resources) c) Interest rates are high d) Imports are high Q4. Crowding out reduces the multiplier because: a) Government spending wastes resources b) Government borrowing raises interest rates, reducing private investment c) Taxes are too high d) The economy is at zero Q5. The Reinhart-Rogoff error: a) Proved austerity works b) Was a spreadsheet error that eliminated a key finding; was used to justify damaging austerity c) Was quickly corrected d) Had no policy impact Q6. The debt-to-GDP ratio is: a) Always zero b) National debt divided by GDP c) GDP divided by debt d) Tax revenue divided by spending

SA1. Why are automatic stabilizers "first-line defense"? SA2. Why do multiplier estimates vary so much? SA3. When are deficits justified and when are they problematic?

TF1. The multiplier is always greater than 1. (T/F) TF2. Austerity during a recession typically speeds recovery. (T/F) TF3. Automatic stabilizers require new legislation. (T/F)

Selected answers in appendices/answers-to-selected.md.