Exam 12: Government and Fiscal Policy

According to Professor Baotai Wang who examined the crowding out phenomenon in Canada between 1961-2000, as discussed in the Case in Point, government expenditures for health and education

All of the following are examples of transfer payments except

Suppose the government increases the corporate income tax rate. This is

Use the following to answer questions . Exhibit: Supply-Side Economics -(Exhibit: Supply-Side Economics) If the economy is initially at Y₁, supply-side economists would Advocate

Automatic stabilizers are an example of discretionary fiscal policy.

A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and reduce borrowing by the Treasury.

Use the following to answer questions . Exhibit: Supply-Side Economics -(Exhibit: Supply-Side Economics) At income level Y₁, there is a(n)

A reduction in tax rates may result in a short-term reduction in government revenues, but it will also leave people with more disposable income.

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

Changes in expenditures and taxes that occur through automatic stabilizers

The term "crowding out" refers to the phenomenon that occurs when increased government Spending

The government has a balanced budget if

Consider two fiscal policy actions. I. a $400 billion reduction in income taxes II. a $400 billion increase in government purchases Which policy will have a bigger impact on aggregate demand?

Suppose a country repeals an investment tax credit and that leads to a decrease in investment spending of $100 billion. Suppose the multiplier is 1.2 and the economy's real GDP is $5,000 billion. This contractionary action

Which of the following statements is true about fiscal policy lags?

The impact of instituting investment tax credits is

The impact of expansionary fiscal policy is weakened because of crowding out.

An inflationary gap can be closed with

Which of the following contributes to implementation lag for discretionary fiscal policy?

An increase in business taxes is likely to reduce aggregate demand because of a decrease in private investment.