Exam 15: Fiscal Policy

If there is an inflationary gap in the economy, then it is producing _____ than its full employment level of output, and the government can follow _____ fiscal policy to close the gap.

According to classical theory, prices and wages are _____, and fiscal policy is _____ to stabilize an economy.

An economy's total government debt at the end of 2017 is $10 trillion. In 2018, the government collects $2 trillion in tax revenue. If the government debt at the end of 2018 is $11 trillion, then how much did the government spend in 2018?

The built-in tax and transfer-payment policies that dampen fluctuations in economic activity are known as:

If there is a recessionary gap in the economy, then it is producing _____ than its full employment level of output, and the government can _____ transfer payments to close the gap.

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 the government can _____ spending to close this gap.

Because individuals are incentivized to work more when tax rates _____, the Laffer curve suggests that _____ tax rates when they are very high can increase the tax revenue.

Most economists now agree on all of the following EXCEPT that:

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

Suppose that it takes two months for the government to implement expansionary fiscal policy after recognizing that the economy is in a recession. In this case, the two months is referred to as the _____ lag.

If there is a recessionary gap in the economy, then it is producing _____ than its full employment level of output, and the government can _____ taxes to close the gap.

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

Which of the following statements is NOT true?

Which of the following is NOT a feature of Keynesian theory?

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

If the government implements expansionary fiscal policy and there is _____ crowding out, then private investment will _____, and the aggregate demand will increase.

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

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 _____ taxes.

A tax system in which high-income people pay a higher proportion of their income in taxes than low-income people is known as ______ tax system.

Suppose that a recession begins on January 15, 2017, and that by the time the government receives the data on the economy and realizes that the economy is in a recession, it is March 15, 2017. In this case, the two months in between these two dates is known as the _____ lag.