Exam 27: Fiscal Policy

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009, approximately one-third took the form of ________ and two-thirds took the form of increases in ________.

Suppose real GDP is $14 trillion and potential real GDP is $14.4 trillion. An increase in government purchases of $400 billion would cause real GDP to ________ potential real GDP (assuming a constant price level).

In the long run, most economists agree that a permanent increase in government spending leads to

A one-time tax rebate, which is not expected to be extended in future years, will

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

For the years 2017-2027, the Congressional Budget Office expects that population growth will be much slower than growth in hours worked.

Compared to the averages for post World War II recessions, the recession of 2007-2009 was ________ in duration and the decline in real GDP was ________.

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

If the absolute value of the tax multiplier equals 1.6, real GDP is $13 trillion, and potential real GDP is $13.4 trillion, then taxes would need to be cut by ________ to restore the economy to potential real GDP.

What is the difference between federal purchases and federal expenditures?

The multiplier effect is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.

To combat a recession with discretionary fiscal policy, Congress and the president should

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase ________ through changing ________.

Which of the following is considered expansionary fiscal policy?

The cyclically adjusted budget is calculated at potential GDP.

Prior to the 1930s, the majority of dollars spent by government was spent at the state and local levels.

Show the impact of tax reduction and simplification using the dynamic aggregate demand and aggregate supply model. Clearly show and identify the impact of the tax change. Assume that aggregate demand and short-run aggregate supply shift as they typically do in the dynamic model. Show what happens to the price level and real GDP because of the tax change.

During the Great Depression, what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Reducing the marginal tax rate on income will