Exam 13: Fiscal Policy, Deficits, and Debt

Suppose the government cuts taxes to keep the economy's cyclically adjusted budget in balance when the economy is expanding. The government is engaging in a(n)

One timing problem in using fiscal policy to counter a recession is the "recognition lag" that occurs between the

If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending.

The political business cycle refers to the possibility that

The American Recovery and Reinvestment Act of 2009 is a clear example of

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 3 percent of real GDP to a surplus of 1 percent of real GDP. The government is engaging in a(n)

Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $300 billion, the Cyclical deficit is

Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt

Fiscal policy refers to

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy

The goal of expansionary fiscal policy is to rein in inflation.

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the

Without a change in discretionary fiscal policy, we would expect that if the economy goes into recession, then the

The federal budget deficit is found by

Government Spending Tax Revenues GDP Year 1 \ 450 \ 425 \ 2,000 Year 2 500 450 3,000 Year 3 600 500 4,000 Year 4 640 620 5,000 Year 5 680 580 4,800 Year 6 600 620 5,000 The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. If year 1 is the ?rst year of this nation's existence and Year 6 is the present year, this nation's public debt is

In 2018, the U.S. public debt was about

eGovernment Spending Tax Revenues GDP Year 1 \ 800 \ 825 \ 4,000 Year 2 850 850 4,200 Year 3 900 875 4,350 Year 4 950 900 4,500 Year 5 1,000 925 4,600 The table contains budget information for a hypothetical economy. All data are in billions of dollars. Assume that Year 1 is the ?rst year for this economy and Year 5 is the current year. What is the public Debt in this economy at Year 5?

An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government raise Taxes to achieve its objective?

Which of the following best describes the built-in stabilizers as they function in the United States?