Exam 16: Fiscal Policy

Tax cuts on business income increase aggregate demand by increasing

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

Fiscal policy refers to changes in

Which of the following would increase the size of the government purchases multiplier?

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

Which of the following would be classified as fiscal policy?

If the economy is slipping into a recession,which of the following would be an appropriate fiscal policy?

Since the Social Security system began in 1935,the number of workers per retiree has

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Economists who believe the supply-side effects of tax cuts are small essentially believe that

Refer to Figure 27-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

The tax increases necessary to fund future Social Security and Medicare benefit payments would be

The crowding out of private spending by government spending will be greater the

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 ________.

What is the difference between fiscal policy and monetary policy?