Exam 16: Fiscal Policy

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

The budget deficit increases during wars and recessions.

Table 16-5 -Refer to Table 16-5.The economy is in the state described by the table above.Draw the dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2,assuming that no policy is pursued.Then illustrate and explain the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing potential GDP.

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to ________ and investment to ________.

An increase in individual income taxes ________ disposable income,which ________ consumption spending.

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Figure 16-12 -Refer to Figure 16-12.An increase in government purchases causes aggregate demand to shift ultimately from AD₁ to AD₂.In the new equilibrium at point B,both real GDP and the price level have increased.The increase in real GDP is ________ than that indicated by the multiplier effect with a constant price level.

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?

Double taxation refers to

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,approximately ________ took the form of tax cuts and ________ took the form of increases in government expenditures.

Which of the following is more likely to be effective in increasing the growth rate of real GDP?

Figure 16-11 -Refer to Figure 16-11.If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph,the difference in real GDP between point A and point B will be

The largest and fastest-growing category of federal government expenditures is

The Trump administration hopes that its program of infrastructure spending might expand employment by luring some prime-age workers back into the labor force.This would ________ the employment-population ratio,which would increase ________.

The nation of Hyperbole is in a recession,and the government decides to increase taxes and reduce government spending to reduce the growing deficit.This will ________ aggregate demand and will likely ________ real GDP and employment.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the basic AD-AS model in the figure above,this would be depicted as a movement from

If the federal government's expenditures are less than its tax revenues,then

Figure 16-11 -Refer to Figure 16-11.In the graph above,the shift from AD₁ to AD₂ represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

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.