Exam 12: Fiscal Policy: Incentives, and Secondary Effects

Which of the following helped transform the budget deficits of the early 1990s into surpluses later in the decade?

Use the figure below to answer the following question(s). Figure 12-2 Refer to Figure 12-2. Which of the following will most likely be favored by a Keynesian economist if the economy is operating at point a?

What is the "crowding-out" effect? How does the crowding-out effect influence the potency of fiscal policy?

The crowding-out effect implies that restrictive fiscal policy will

Which of the following most clearly indicates that fiscal policy is becoming more restrictive?

The tax reductions, increases in defense expenditures, and budget deficits of the 1980s are characteristic of

The political incentive structure tends to

According to non-Keynesians, how will an increase in government spending financed by borrowing during a recession affect recovery?

Which of the following is true of debt financing?

If policymakers cut taxes because they perceive that recession is a major threat, a proponent of the new classical view will be most likely to argue that the tax cut is

Supply-side economics stresses that high marginal tax rates

Kimani sells life insurance and is considering buying a $50,000 Cadillac for business purposes (thus, the expense reduces her taxable income). If Kimani is in the 40 percent marginal tax bracket, how much after-tax income will she have to give up in order to enjoy the Cadillac?

Compared to a permanent reduction in tax rates, a temporary tax cut will generally

Government spending programs that create jobs are often popular because