Exam 16: Fiscal Policy

Government outlays (trillions of Tax revenue (trillions of Year 2005 dollars) 2005 dollars) 2005 0.75 0.80 2006 0.80 0.83 2007 0.87 0.86 2008 0.95 0.95 2009 1.06 1.02 The table above gives a nation's government outlays and tax revenue for 2005 through 2009. -During which years did the country have a budget surplus?

The figure above shows a labor market with an income tax. -In tax wedge in the figure above is equal to ________ per hour, which creates an after-tax real wage rate of ________ per hour and employment of ________ billion hours per year.

The balanced budget multiplier is

When taxes are cut, aggregate demand ________ and aggregate supply ________.

If the federal government has a budget deficit, then it is definitely the case that

Ignoring any supply-side effects, suppose the government is considering cutting taxes by $100 billion or increasing government expenditures on goods and services by $100 billion.Then

The figure above shows an economy aggregate demand curve and aggregate supply curves. -Suppose the shift from AD₀ to AD₁ and from AS₀ to AS₁ is the result of fiscal policy.If the effect on aggregate supply was larger than the figure above shows, as a result the price level would be ________ 110 and real GDP would be ________ $14 trillion.

The national debt can only be reduced if

The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP. -In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.

In order to help the economy recover from a recession using fiscal policy, the government can ________ so that aggregate demand increases.

Describe the difference between discretionary and automatic fiscal policy.

When the government's outlays exceed its tax revenue, the national debt

Which of the following is an example of an automatic fiscal policy action?

Increasing the income tax rate ________ the before-tax real wage rate and ________ the after-tax real wage rate.

Discretionary fiscal policy is a fiscal policy action, such as

The magnitude of the government expenditure multiplier is ________ the magnitude of the tax multiplier.

The greater the tax wedge, the ________ the amount of employment and the ________ potential GDP.

Need-based spending ________ during an expansion and ________ during a recession, which leads to larger budget deficits during the ________ phase of the business cycle.

Depending on the relative size of the federal government's expenditures and tax revenues, the federal government's budget can be in three possible conditions.What are the three possible conditions and what is the relationship of federal government expenditures and tax revenues for each?

Automatic stabilizers include