Exam 16: Fiscal Policy

If the government raises taxes on labor income and interest income, explain how potential GDP and economic growth are affected.

A country reports that its government outlays total $0.8 trillion and its tax revenues total $0.6 trillion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

The law-making time lag is best described as the time that it takes

Ignoring any supply-side effects, if government expenditure on goods and services decrease by $10 billion and taxes decrease by $10 billion, then real GDP ________ and the price level ________.

Why is increased spending on NASA considered a discretionary fiscal policy rather than an automatic fiscal policy?

Do automatic fiscal stabilizers eliminate business cycles?

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

Define the balanced budget multiplier and explain how it works.In your answer, ignore any supply-side effects.

The figure above shows an economy's aggregate demand curve, aggregate supply curve, and potential GDP. -In the figure above, the ________ gap is equal to ________.

Which of the following is an example of a fiscal stimulus?

If the economy is in equilibrium with real GDP less than potential GDP, there is ________ gap and a fiscal policy that ________ is appropriate.

If the economy is at an above full-employment equilibrium, ________ gap exists and discretionary fiscal policy that ________ will return real GDP to potential GDP.

Ignoring any supply-side effects, to close a recessionary gap of $100 billion with a government expenditure multiplier of 5, the government could

In order for the United States to use discretionary fiscal policy to deal with a recessionary gap,

What are automatic stabilizers? How do they help stabilize real GDP?

The government has a budget surplus if

Automatic stabilizers

An economic expansion leads to ________ needs-tested spending and ________ induced taxes.

Since 2000, the U.S.government has generally had a government budget ________ and so the national debt has ________.

Ignoring any supply-side effects, to close an inflationary gap of $100 billion with a government expenditure multiplier of 5, the government could