Chat with AIExam 12: Government and Fiscal Policy
A contractionary fiscal policy
I. decreases a government budget deficit or increases a government budget surplus.
II. includes tax cuts.
III. may include discretionary cuts in transfer payments.
(72) 
VerifiedC
In the United States, government purchases, as a percentage of real GDP, have generally declined since the 2001.
(77) VerifiedFalse
Explain the concept of supply-side economics. Could the reasoning behind this theory make it in any way more effective than demand-management policies? Could it be less effective? Why?
(84) 
Answered by Examlex AI CopilotSupply-side economics is an economic theory that focuses on increasing the overall supply of goods and services in the economy as a means to stimulate economic growth. This theory suggests that by reducing barriers to production, such as taxes and regulations, businesses will be incentivized to invest, innovate, and expand, leading to increased productivity and economic output.
The reasoning behind supply-side economics suggests that by promoting entrepreneurship and investment, the economy will experience long-term growth and job creation. Proponents of this theory argue that by allowing businesses to keep more of their profits through tax cuts, they will have more resources to invest in new technologies, research and development, and hiring more workers.
In contrast, demand-management policies focus on stimulating economic growth through increasing consumer demand, typically through government spending and monetary policies. These policies aim to boost consumer spending and aggregate demand to drive economic growth.
The effectiveness of supply-side economics compared to demand-management policies is a topic of debate among economists. Proponents of supply-side economics argue that by incentivizing businesses to invest and innovate, the economy will experience sustainable long-term growth. However, critics argue that supply-side policies may primarily benefit the wealthy and corporations, leading to increased income inequality and potentially exacerbating economic downturns.
On the other hand, demand-management policies may be more effective in stimulating short-term economic growth by boosting consumer spending and aggregate demand. However, these policies may also lead to increased government debt and inflation if not managed carefully.
In conclusion, the effectiveness of supply-side economics compared to demand-management policies depends on various factors such as the specific economic conditions, the distribution of benefits, and the overall impact on the economy. Both approaches have their strengths and weaknesses, and the optimal policy mix may vary depending on the specific circumstances.
The United States has, by far, the largest national debt as a percentage of its GDP among industrialized nations.
(65) Which of the following are possible consequences when the government reduces government purchases to address an inflationary gap?
I. increase in the price of bonds
II. increase in net exports
III. decrease in the federal budget deficit (or increase the surplus)
IV. decrease in the exchange rate
(86) Suppose a country increases government purchases by $700 billion. Suppose the government spending multiplier is 2 and the economy's real GDP is $6,000 billion. This policy action shifts the aggregate demand curve to the right by
(81) If there is an inflationary gap in the economy, discretionary fiscal policy would likely involve Jan action to
(73) All of the following are examples of transfer payments except
(85) Medicaid, welfare payments, and Temporary Assistance to Needy Families are classified as
(78) Which of the following statements is true about fiscal policy lags?
(90) Figure 12-1 
-Refer to Figure 12-1. If discretionary fiscal policy is used to eliminate the gap, policy actions Jwill
-Refer to Figure 12-1. If discretionary fiscal policy is used to eliminate the gap, policy actions Jwill (85) An expansionary fiscal policy increases a government budget deficit or reduces a government budget surplus.
(93) An expansionary fiscal policy
I. includes an increase in government spending.
II. includes tax cuts.
III. increases a government budget deficit or reduces a government budget surplus.
(76) Suppose the economy experiences a recessionary gap. Policymakers who believe that Jgovernment is too big would favor which of the following policies to close the gap?
(68) One method of assessing the degree to which current fiscal policies affect future generations is through a device called
(90) 
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