Exam 12: Fiscal Policy

Fiscal policy is determined by

Table 12.3 -Refer to Table 12.3.Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2017 and in 2018 if the federal government does not use fiscal policy.If the federal government wants to keep real GDP at its potential level in 2018, it should

If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply?

An increase in the sensitivity of private spending (consumption, investment, and net exports)to changes in the interest rate ________ the government purchases multiplier.

Which of the following would be most likely to induce the federal government to conduct expansionary fiscal policy?

Calculate the government purchases multiplier if the marginal propensity to consume equals 0.75, the tax rate is 0.2, and the marginal propensity to import equals 0.3.

Expansionary fiscal policy involves

In an open economy, the government purchases multiplier will be

Research by Christopher Ruhm shows that people's health ________ on average during an economic ________.

The multiplier effect is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.

A decrease in individual income taxes ________ disposable income, which ________ consumption spending.

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

Which of the following would increase the size of the government purchases multiplier?

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

In an open economy, the government purchases multiplier will be smaller the

Figure 12.13 Alt text for Figure 12.13: In figure 12.13, a graph depicting the shift in aggregate demand. Long description for Figure 12.13: The x-axis is labelled, real GDP (trillions of 2007 dollars), and the y-axis is labelled, price level (CPI).3 lines are shown; AD1, AD2, and SRAS.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line SRAS intersects line AD1 at point A, more than half way along line AD1.Line SRAS intersects line AD2 at point B, less than half way along line AD2. -Refer to Figure 12.13.An increase in government purchases of $20 billion causes aggregate demand to shift ultimately from AD₁ to AD₂.The difference in real GDP between point A and point B will be ________ $20 billion.

Assume your marginal income tax rate is 25%. If you a wage rate of $30 working in the campus bookstore, the tax wedge you face will be

The government purchases multiplier equals the change in ________ divided by the change in ________.

To combat inflation, the federal government could

Suppose the government wants to maintain a balanced budget.To achieve this goal, when the economy falls into recession government would need to ________ taxes, which would cause aggregate demand to ________.