Exam 18: Fiscal Policy

To counteract the effect of automatic stabilisers during a recession and keep the budget balanced,the federal government would need to ________ government spending,or ________ taxes,which would ________ aggregate demand.

AACSB: Able to translate knowledge of business and management into practice Refer to Figure 18.5 for the following question. Figure 18.5 -Refer to Figure 18.5.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 ________.

If tax reduction and simplification are effective,then __________.

To help fight a recession,the government could _________.

What is the structural budget deficit or surplus? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Government net debt in Australia was highest in which of the following time periods?

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

Reducing the marginal tax rate on individual income will ________.

'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.

An increase in government spending may expedite recovery from a recession in the short run,but in the long run,this policy may __________.

Refer to Figure 18.2 for the following question. Figure 18.2 -In Figure 18.2,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the government use to move the economy to point C?

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential,_________.

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

An equal decrease in government purchases and taxes will cause __________.

Give examples of 'automatic stabilisers'.Explain how automatic stabilisers work when there is an economic boom. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Suppose that the government allocates $2 billion for new roads.It also raises taxes by $2 billion to keep the deficit from growing.If the marginal propensity to consume = 0.8,what is the effect on equilibrium GDP?

Which of the following is an automatic stabiliser?

Government purchases and transfer payments are included in the measure of government expenditures.

A cut in tax rates affects equilibrium real GDP through two channels: ________ disposable income and consumer spending,and ________ the size of the multiplier effect.

Government expenditure in Australia as a percentage of GDP has consistently trended upward since the 1960s.