Exam 18: Fiscal Policy

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 increase government purchases by

Prior to the 1930s,the majority of dollars spent by government was spent at the state and local levels.

If policymakers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

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

As a percentage of GDP,federal expenditures ________ from 1992 to 2001,________ from 2001 to 2011,and have ________ since 2011.

Which of the following would be most likely to induce Congress and the president to conduct expansionary fiscal policy? A significant

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

For the years 2017-2027,the Congressional Budget Office expects that population growth will be much slower than growth in hours worked.

Federal government purchases as a percentage of GDP

Table 18-3 Year Potential Real GDP Real GDP Price Level 2018 \ 18.0 trillion \ 18.0 trillion 150 2019 18.5 trillion 18.2 trillion 152 -Refer to Table 18-3.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 use fiscal policy successfully to keep real GDP at its potential level in 2019,which of the following will be higher than if Congress and the president had taken no action?

Figure 18-7 -Refer to Figure 18-7.Given that the economy has moved from A to B in the graph above,which of the following would be the appropriate fiscal policy to achieve potential GDP?

The tax wedge is the difference between the

A tax rebate,which is expected to be offered in this and all future years,will

Fiscal policy refers to changes in

What is the "tax wedge"?

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.If contractionary policy is used to move the economy back to long run equilibrium,this would be depicted as a movement from ________ using the basic AD-AS model in the figure above.

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

As the tax wedge associated with a given economic activity gets smaller,we would expect

The long-run growth rate of real GDP depends primarily on the growth in the number of hours worked and the growth rate of labor productivity.

Which of the following is considered expansionary fiscal policy?