Exam 15: Fiscal Policy

In one economy, low-income people pay 10 percent of their income in taxes, and high-income people pay 18 percent of their income in taxes. This economy has a _____ tax system.

If government spending is _____ than the tax revenue, then the government is running a budget deficit. In this case, the overall debt of the government will:

Use Figure: Fiscal Policy I. If the economy is operating at point A, then there is _____ gap, and the government can _____ taxes to close this gap. ​ Figure: Fiscal Policy I

If the short-run aggregate supply curve intersects the aggregate demand curve to the left of the long-run aggregate supply curve, then the economy has _____ gap, and the government can close the gap by _____ spending.

Which of the following statements is true?

Suppose that a decrease in the federal income tax rate increases the government's tax revenue. Provide one plausible explanation for this paradox.

If the short-run aggregate supply curve intersects the aggregate demand curve to the left of the long-run aggregate supply curve, then the economy has _____ gap, and the government can close the gap using _____ fiscal policy.

The two largest contributors to the U.S federal government's tax revenue are the:

Suppose that an economy is producing an output that is less than the full-employment level of output. a. Suggest one policy to bring the economy back to its full employment level. b. Show the impact of the policy graphically using the aggregate demand and aggregate supply graph, clearly marking the equilibrium points before and after the policy action. c. Suppose that the goal of the government is to close the gap by adding as little to the government's deficit as possible. In this case, what policy should be recommended?

If the government implements an expansionary fiscal policy using borrowed funds and there is partial crowding out, then private investment will _____, and the aggregate demand will:

Which of the following statements is true?

Fiscal policy refers to the set of policies of the government in relation to:

If the full employment level of output for an economy is 1,000 units and it is currently producing 1,100 units, then there is _____ gap, and _____ fiscal policy can be used to close this gap.

_____ lag refers to the delay between the recognition that an economy is in a recession and the implementation of a policy response, and _____ lag is the delay between the policy change and the resulting effect.

Which of these statements is true?

Use Figure: Fiscal Policy I. If the economy is operating at point A, then there is _____ gap, and the government should use _____ fiscal policy to close this gap. ​ Figure: Fiscal Policy I

Which one of these is not a lag associated with the timing of fiscal policy action?

Because low-income people spend a _____ proportion of their income in buying goods and services than high-income people, a sales tax is a _____ tax.

During an expansion, the income tax paid by people _____, and transfer payments in the form of unemployment insurance:

If the short-run aggregate supply curve intersects the aggregate demand curve to the right of the long-run aggregate supply curve, then the economy has _____ gap, and the government can close the gap by _____ spending.