Exam 12: Government and Fiscal Policy

During an expansion, which of the following occur because of automatic stabilizers? I. Income tax revenues tend to rise. II. Government transfer payments tend to rise. III. The government's budget deficit tends to fall or its budget surplus tends to rise. IV. They tend to amplify the rise in real GDP.

Which of the following is an advantage of automatic stabilizers?

Suppose a country decreases government purchases by $400 billion. Suppose the government spending multiplier is 1.5 and the economy's real GDP is $8,000 billion. This contractionary policy action shifts the aggregate demand curve to the left by

Contractionary fiscal policy includes

The use of government expenditures and taxes to influence the level of economic activity is called fiscal policy.

Use the following to answer questions . Exhibit: Fiscal Policy 2 -(Exhibit: Fiscal Policy 2) If discretionary fiscal policy is used to eliminate the gap, policy actions will

The government has a budget surplus if

Which of the following statements characterizes government purchases in the United States between 2001 and 2011?

As discussed in the Case in Point on the degree of crowding out of Canadian private investment as a result of government expenditures from 1961-2000, Professor Baotai Wang concluded that

Transfer payments tend to rise automatically during a recession and fall automatically during an expansion.

Use the following to answer questions . Exhibit: Fiscal Policy 1 -(Exhibit: Fiscal Policy 1) At output level Y₁,

Which of the following statements characterizes government transfer payment spending in the United States between 1960 and 2015?

The use of government expenditures and taxes to influence the level of economic activity is Called

Suppose a country institutes an investment tax credit and that leads to an initial increase in investment spending of $100 billion. Suppose the multiplier is 1.5 and the economy's real GDP is $5,000 billion. This action is

Recognition lags in fiscal policy stem largely from

A recessionary gap can be closed with

When contractionary fiscal policy leads to

The sum of all past federal deficits minus any surpluses is called the

Use the following to answer questions . Exhibit: Fiscal Policy 1 -(Exhibit: Fiscal Policy 1) In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do?

An expansionary fiscal policy is likely to result in the Treasury