Exam 13: Fiscal Policy

An increase in government expenditure shifts the AD curve_________ and an increase in taxes shifts the AD curve_________ .

The largest item of government outlays is__________ .

If the economy has a structural deficit of $25 billion and a cyclical deficit of $75, we can conclude that the current budget deficit is_________ billion.

The federal government debt is equal to the

When real GDP is less than potential GDP, an increase in government expenditures will _________ Real GDP and_________ the price level.

How does a tax on labor income affect potential GDP?

Deliberate changes in government expenditures and taxes to influence GDP are discretionary fiscal policy.

The_________ the interest rate, the _________the present value of a given future amount.

A structural deficit occurs when the government budget has a deficit

A discretionary fiscal policy is a fiscal policy that

Component Dollars (billion) Personal income taxes 500 Social security taxes 400 Corporate income taxes 150 Indirect taxes 75 Transfer payments 1,200 Expenditure on goods and services 225 Debt interest 75 -The table above has data for a country?s government budget. The country has government revenues of__________ billion.

What is needs-tested spending and how does it affect the government expenditure multiplier?

If the federal governmentʹs tax revenues are greater than its outlays, then the federal budget has a

Year Government tax revenues (billions of dollars) Government expenditures (billions of dollars) 1 240 240 2 250 245 3 260 255 4 300 320 5 325 340 -What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

Comparing the fiscal imbalance for the current generation versus future generations, it is the case that

Comparing the U.S. budget position for 2010 to the rest of the world, we see that as a percentage of GDP, the_________ than in most other countries.

In January 2008, the unemployment rate was only 4.9 percent and real GDP was growing. But President Bush ʺacknowledged that Americans were ʹanxious about the economy.ʹ As a result, it was reported that ʺ...the Bush administration and Congressional leaders, increasingly concerned about a possible recession, are moving closer to agreeing that an economic stimulus package is needed soon.ʺ In order for the package to be approved, the leaders in Washington implied that ʺ... they might be able to put aside longstanding partisan differences .ʺ Which of the following lags are government officials trying to avoid?

If the government raises taxes on labor income and interest income, explain how potential GDP and economic growth are affected.

Fiscal policy attempts to achieve all of the following objectives EXCEPT .

If the governmentʹs outlays are $1.5 trillion and its tax revenues are $2.2 trillion, the government is running a budget