Exam 18: Public Choice and Special-Interest-Group Politics

Economists who believe in complete crowding out are not likely to advocate for an increase in government spending to remove the economy from a recessionary gap.

There are economists who believe that some types of government spending are better for the economy than other types of government spending.

Suppose the tax multiplier is 2.7.Assuming prices are constant,this means that

Economists who view the AS curve as upward-sloping believe that changes on the demand side _______ result in changes in Real GDP in the short run.Economists who view the AS curve as vertical believe that government changes from the demand side________________ to raise Real GDP in the short run.

Wage flexibility is one of the conditions necessary for an economy to be able to bring itself out of a recessionary gap.

Suppose that a $114 billion increase in government spending increases Real GDP by $399 billion,and that a $96 billion tax reduction increases Real GDP by $336 billion.In this situation,the tax multiplier is _______________ the government spending multiplier.

If the (average)tax rate is cut by 10%,and as a result the tax base rises by 15%,tax revenues will rise.

Economist A believes that the elasticity of investment is 0.76 while economist B believes that the elasticity of investment is 1.76.Which economist,A or B,is more likely to believe that a change in the interest rate will change the current economic environment?

With respect to monetary policy,some economists argue in favor of a rules-based system,while other economists argue in favor of discretion for the Fed.

Economist Z believes that the government spending multiplier is larger than the tax multiplier,and thus would tend to prefer ________________ when expansionary _______________ policy is needed to raise aggregate demand.

Economists who view the AS curve as vertical believe that government ________________ to raise Real GDP (in the short run)from the demand side of the economy.Economists who view the AS curve as upward-sloping believe that changes in Real GDP (in the short run)_________ result from changes on the demand side.

"It matters how the government spends any extra dollars." The economist who said this most likely believes that

An economist who believes that increases in government spending will not increase aggregate demand,may cite crowding out as the reason for this belief.

Economist A says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap.Government should either raise its _____________ or cut ___________________.I believe the government spending multiplier is ____________ than the tax multiplier,so I favor _____________________.

Which U.S.president said,"Give me a one-handed economist.All my economists say 'On the one hand,and then on the other hand.'"?

It is a fact that the government spending multiplier is always greater than the tax multiplier.

Economist B believes that if tax rates are cut,tax revenue is likely to fall.This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base.

Economists who are in favor of an increase in the size and scope of government tend to prefer ________________ when expansionary _______________ policy is needed to raise aggregate demand.

Those economists who view the AS curve as being vertical see more government tools capable of raising Real GDP than do the economists who view the AS curve as being upward-sloping.

All economists agree that the aggregate supply (AS)curve is vertical.