Exam 12: Fiscal Policy

If the government increases spending and there is a complete direct expenditure offset, then

Automatic stabilizers have the effect of

To the extent that a direct expenditure offset results from an expansionary fiscal policy,

The advantage of automatic stabilizers is that they

According to the traditional Keynesian approach, a tax cut raises aggregate demand because

One part of the supply-side argument is that

The crowding-out effect is

Fiscal policy refers to the

One characteristic of built-in or automatic stabilizers is that

Using graphs, explain how indirect crowding out can occur when the government increases spending in an attempt to stimulate the economy.

An example of expansionary fiscal policy could be

In the traditional Keynesian model, an income tax cut raises real GDP because

-Refer to the above figure. If the relevant aggregate demand curve was AD₂, the government could do all of the following to close the existing gap EXCEPT

The proposition that decreases in taxes that raise the government budget deficit has no effect on aggregate demand is called the

Fiscal policy

Because of crowding out

Which one of the following is an example of discretionary fiscal policy used to correct an inflationary gap?

The amount of time that it takes to identify a national economic problem is

Fiscal policy during periods of relatively low unemployment and low inflation have

Other things being equal, a reduction in taxes will