Exam 29: Fiscal Policy

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit ________ or the structural surplus ________.

Expansionary fiscal policy

Choose the statement that is incorrect.

Which of the following would not increase an existing budget deficit?

Consider the economy of NoTax, where the government expenditure multiplier is 2.5. If the government desires to shift the AD curve rightward by $5 billion, the correct increase in government expenditure is

An increase in income taxes

Use the figure below to answer the following questions. Figure 29.3.1 -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. Discretionary fiscal policy would be shown as a movement

Use the figure below to answer the following questions. Figure 29.3.1 -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. The budget is balanced when real GDP equals

If the economy is in an expansion, and the federal government is running a deficit, then a recession would automatically

Everything else remaining the same, as the economy enters a recession,

Use the figure below to answer the following questions. Figure 29.3.1 -Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If potential GDP is $750 billion, and actual real GDP is $650 billion, the cyclical deficit is

During an expansion, revenues

When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion. Real GDP actually equals $14 trillion and the budget surplus is $3 trillion. The economy has a structural ________ and a cyclical ________.

Everything else remaining the same, as the economy enters an expansion,

If revenues exceed outlays, the government's budget balance is ________, and the government has a budget ________.

Suppose the tax rate on interest income is 50 percent, the real interest rate is 3 percent, and the inflation rate is 4 percent. The real after-tax interest rate is

Suppose that in China, investment is $400 billion, saving is $400 billion, tax revenues are $500 billion, exports are $300 billion, and imports are $200 billion. The government budget ________ the supply of loanable funds, which ________ the real interest rate and ________ investment.

At the end of 2011, the government of France's debt was €1,126 billion. (€ is euro, the currency of France). In 2012, the government spent €1,067 billion and ended the year with a debt of €1,304 billion. How much did the government receive in tax revenue in 2012?

Automatic fiscal policy

Norland has the budget deficit of $15 billion. According to the government economists, Norland has a structural deficit of $3 billion. What is a cyclical deficit in Norland?