Exam 13: Fiscal Policy

Explain why the 'tax multiplier' is different from the government 'purchases multiplier'. _____________________________________________________________________________________________ _____________________________________________________________________________________________

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

'Expansionary fiscal policy' is used by the government in an attempt to fight rising inflation.

Assume in a closed economy that taxes are fixed and the marginal propensity to consume is equal to 0.8. What is the government purchases multiplier?

The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus.

Refer to Figure 13.5 for the following question. Figure 13.5 -Refer to Figure 13.5. If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be:

In 2015/2016, after social security and welfare payments, which of the following is the second largest category of Australian federal government expenditures at nearly 16% of the total?

Which is the largest source of federal government revenue and which is the largest single area of government expenditure in Australia? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The structural budget deficit calculates the budget surplus or deficit if the economy was:

To counteract the effect of automatic stabilisers during a recession and keep the budget balanced, the federal government would need to ________ government spending, or ________ taxes, which would ________ aggregate demand.

Which of the following is a government 'expenditure' and not a government 'purchase'?

'Fiscal policy' (discretionary fiscal policy)is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, healthy rates of economic growth and high employment.

Refer to Figure 13.3 for the following question. Figure 13.3 -Refer to Figure 13.3. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?

Explain why accurately timing the fiscal policy may be more difficult than accurately timing of monetary policy. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following is considered 'expansionary fiscal policy'?

Slow growth in aggregate demand leads to ________ inflation and ________ unemployment.

Both Milton Friedman and Edmund Phelps argued:

What is the difference between 'federal purchases' and 'federal expenditures'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Refer to Figure 13.4 for the following questions. Figure 13.4 -In Figure 13.4, if fiscal policy is successful at moving the economy from point B to equilibrium at potential GDP, which of the following will occur?

Explain how lowered taxes on capital gains and dividends might increase aggregate supply. _____________________________________________________________________________________________ _____________________________________________________________________________________________