Exam 27: Fiscal Policy

Active changes in tax and spending by government intended to smooth out the business cycle are called ________, and changes in taxes and spending that occur passively over the business cycle are called ________.

Which of the following statements about the Social Security, Medicare, and Medicaid programs is true?

The tax multiplier equals the change in ________ divided by the change in ________.

Tax cuts on business income increase aggregate demand by increasing

The Trump administration hopes that its program of infrastructure spending might expand employment by luring some prime-age workers back into the labor force. This would ________ the employment-population ratio, which would increase ________.

In recent economic history, the U.S. federal budget was in surplus from

Historically, the largest U.S. federal budget deficits as a percentage of GDP in the 20th century occurred during

Which of the following is a government expenditure, but is not a government purchase?

In an open economy, the government purchases multiplier will be

Figure 27-1 -Refer to Figure 27-1. Suppose the economy is in a recession and expansionary fiscal policy is pursued. Using the basic AD-AS model in the figure above, this would be depicted as a movement from

Article Summary In November 2017, the House Ways and Means Committee announced a tax reform bill which includes hundreds of changes to the tax code. Overall, the tax plan represents a move in the direction of greater neutrality and global competitiveness. Following are eight of the most important provisions in the tax bill. 1. The corporate tax rate would be reduced to 20 percent. 2. Pass-through business income would be taxed at a maximum rate of 25 percent. 3. Some disincentives to investment would be rolled back. 4. The country would move to a territorial tax system. 5. Many itemized deductions would be eliminated. 6. The estate tax would be repealed. 7. The tax treatment of interest would change. 8. Tax expenditures would be curtailed. -Refer to the Article Summary. A reduction in the corporate tax rate to 20 percent would ________ the return corporations receive from new investments in equipment and factories, and this would ________ aggregate supply.

Which of the following is the largest category of federal government expenditures?

What is expansionary fiscal policy? What is contractionary fiscal policy?

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out, the new equilibrium level of GDP is likely to

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

In an open economy, the government purchases multiplier will be smaller the

Assume a country is required by law to balance the budget every year. Suppose aggregate demand falls, causing a recession and a budget deficit. To balance the budget, what would the government need to do with the level of government spending and taxes? How would these changes in government spending and taxes affect aggregate demand and the economy?

If real equilibrium GDP is above potential GDP, expansionary fiscal policy should be pursued.

As a percentage of GDP, federal expenditures ________ from 1992 to 2001, ________ from 2001 to 2011, and have ________ since 2011 .