Exam 16: Fiscal Policy

During most of the years of the Great Depression,the actual federal budget was in ________,and the cyclically adjusted budget was in ________.

What is meant by crowding out? Explain the difference between crowding out in the short run and in the long run.

If policy makers are concerned that the economy is in danger of rising inflation because aggregate demand is increasing faster than aggregate supply,the appropriate fiscal policy response is to

An increase in the money supply is a discretionary fiscal policy which will increase aggregate demand.

Suppose that the current equilibrium GDP is $14.5 trillion and that potential GDP is $14.3 trillion.Will decreasing government purchases by $200 billion,or raising taxes by $200 billion,restore the economy to potential GDP? Explain.

Some economists argue that the federal government should normally run a deficit at potential GDP,with the borrowed funds applied to

Figure 27-6 -Refer to Figure 27-6.Given that the economy has moved from A to B in the graph above,which of the following would the appropriate fiscal policy to achieve potential GDP?

Table 27-4 -Refer to Table 27-4.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy.If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2014,which of the following will be lower than if the Congress and the president had taken no action?

Double taxation refers to

In an open economy,the government purchases multiplier will be larger the

Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act,which is an example of discretionary fiscal policy aimed at increasing

The problem causing most recessions is too little

Critics of spending on infrastructure as a means to stimulate the economy,such as Alan Viard of the American Enterprise Institute,note that,dollar for dollar,tax cuts and direct government payments ________ infrastructure spending,________.

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential,

What is fiscal policy,and who is responsible for fiscal policy?

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that ________,the government purchases multiplier would be lower than the administration's estimate,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that ________,the multiplier would be higher than the administration's estimate.

A tax rebate by the government would

The tax multiplier is calculated as "one minus the government purchases multiplier."

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.