Exam 18: Fiscal Policy

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

Table 18-2 Year Potential Real GDP Real GDP Price Level 2018 \ 18.0 trillion \ 18.0 trillion 150 2019 18.5 trillion 18.8 trillion 154 -Refer to Table 18-2.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2018 and in 2019 if Congress and the president do not use fiscal policy.If Congress and the president want to keep real GDP at its potential level in 2019,they should

An increase in government spending will force an appreciation of the dollar,which causes net exports to fall.

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to decrease taxes by

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

The largest source of federal government revenue in 2016 was

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion,then the economy

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

During the twentieth century,the largest budget deficits as a percentage of GDP occurred

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

In recent economic history,the U.S.federal budget was in surplus from

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

From an initial long-run equilibrium,if aggregate demand grows more slowly than long-run and short-run aggregate supply,then Congress and the president would most likely

Which of the following would be classified as fiscal policy?

The impact of crowding out may be the least

If the federal budget has an actual budget surplus of $75 billion,but a cyclically adjusted budget surplus of $50 billion,then the economy must be above potential real GDP.

A(n)________ in private expenditures as a result of a(n)________ in government purchases is called crowding out.

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and Congress to conduct contractionary fiscal policy.Briefly explain the condition of the economy and what the president and Congress are attempting to do.