Exam 18: Fiscal Policy

An increase in the sensitivity of private spending (consumption,investment,and net exports)to changes in the interest rate ________ the government purchases multiplier.

In Year 1 suppose the economy is at potential GDP and that the federal budget deficit equals $100 billion.In Year 2 the federal budget deficit rises to $150 billion,but the cyclically adjusted budget deficit falls to $75 billion.How can the actual budget deficit rise and the cyclically adjusted budget deficit fall?

Congress and the president carry out fiscal policy through changes in

In recent economic history,the U.S.federal budget was in surplus during

Figure 18-6 -Refer to Figure 18-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion,then the economy

From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely

The Social Security and Medicare programs have been a failure in terms of reducing poverty among elderly U.S.citizens.

Lowering the individual income tax will increase household disposable income and consumption spending.

Compare the effect on the price level and real GDP of a decrease in tax rates assuming a supply-side effect versus no supply-side effect.Compared to no supply-side effect,including a supply-side effect for the decrease in tax rates will cause the price level to increase ________ and real GDP to increase ________.

From the 1960s to 2012,transfer payments

What is the difference between federal purchases and federal expenditures?

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.

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

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

A decrease in which of the following would decrease the tax wedge?

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

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

Figure 18-2 -Refer to Figure 18-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by the Congress and the president would be to

Figure 18-12 -Refer to Figure 18-12.An increase in government purchases of $200 billion causes aggregate demand to shift ultimately from AD₁ to AD₂.Assuming a constant price level,the difference in real GDP between point A and point B will be ________ $200 billion.