Exam 26: Fiscal Policy

Suppose the economy is initially in equilibrium, and real and potential GDP are equal. Now, suppose export orders increase. Under these circumstances, which of the following statements is true?

The size of the budget surplus depends on the state of the economy.

What are the arguments used by the proponents of discretionary fiscal policy?

Transfer payments are not affected by cyclical activity.

A decrease in tax rates

The structural budget surplus is the size of the budget surplus when

Which of the following is not an instrument of fiscal policy?

All four of the major fiscal interventions implemented in the 2000's decade have been blamed for worsening the long-term budget situation of the United States.

Which of the following would cause the AD curve to shift to the left?

The year 2001 was the ____ consecutive year the U.S. federal government had been running a budget ____.

Suppose the government surplus is currently .5 percent of real GDP and the structural surplus is 1.5 percent.

The table below shows the relationship between the deficit and real GDP. Draw a diagram depicting this relationship. Assume potential GDP is $6,900 billion.

Countercyclical fiscal policy is risky because

The 2008 and 2009 major fiscal stimulus bills were motivated by the serious economic recession that hit the United States in 2008, and can be classified as "countercyclical."

In which of the following years was the debt to GDP ratio the lowest?

The debt to GDP ratio

Which of the following is true about the projected U.S. federal tax revenues and expenditures for 2017?

Real GDP and the budget deficit are negatively related.