Exam 13: Fiscal Policy

Government transfer payments ________ during expansions and ________ during recessions.

-Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?

In January 2008, the unemployment rate was only 4.9 percent and real GDP was growing. But President Bush "acknowledged that Americans were 'anxious about the economy'." As a result, it was reported that "...the Bush administration and Congressional leaders, increasingly concerned about a possible recession, are moving closer to agreeing that an economic stimulus package is needed soon." In order for the package to be approved, the leaders in Washington implied that "... they might be able to put aside longstanding partisan differences." Www)nytimes.com 1/12/2008 Which of the following lags are government officials trying to avoid?

In January 2013 the Chinese government held approximately $1 trillion in U.S. government debt. The Chinese government accumulated such a large about of the U.S. government debt because for the past decade, the United States

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $16 trillion. If real GDP is $16 trillion, then the government has a ________.

The government budget deficit tends to decrease during the expansion phase of a business cycle because tax revenues ________ and government transfer payments ________.

-The figure above shows tax revenues and government expenditures in the economy of Meadowlake. Potential GDP is $17 trillion. If real GDP is $15 trillion, then the government has a ________.

Deliberate changes in government expenditures and taxes to influence GDP

Suppose that the tax rate on interest income is 50 percent, the real interest rate is 3 percent, and the inflation rate is 4 percent. In this case, the real after-tax interest rate is equal to

What are some of the limitations of fiscal policy? Briefly discuss them.

Looking at the supply-side effects on aggregate supply shows that a tax hike on labor income

When tax revenues exceed outlays, the government has a ________, and when outlays exceed tax revenues, the government has a ________.

What does the Employment Act of 1946 specify? Why is it an important economic milestone?

An increase in the income tax rate ________ employment and ________ potential GDP.

Suppose the government of Japan increases its expenditure on goods and services. In the short run, this increase will

During an expansion, tax revenues ________ and government transfer payments ________.

Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive

If tax receipts exactly equaled government outlays in a year, the federal government debt would be zero.

-In the above figure, which of the following policies could move the economy to potential GDP?

When interest income is taxed and the inflation rate rises, the tax revenue collected by the government