Exam 16: Fiscal Policy

The tax multiplier is calculated as "one minus the government purchases multiplier."

If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion,then the economy

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

The tax multiplier

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Double taxation refers to

How can tax simplification be beneficial to the economy?

Show the impact of tax reduction and simplification using the dynamic aggregate demand and aggregate supply model.Clearly show and identify the impact of the tax change.Assume that aggregate demand and short-run aggregate supply shift as they typically do in the dynamic model.Show what happens to the price level and real GDP because of the tax change.

Which of the following is a government expenditure,but is not a government purchase?

Figure 16-3 -Refer to Figure 16-3.In the graph above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Congress and the president?

Assume a country is required by law to balance the budget every year.Suppose aggregate demand falls,causing a recession and a budget deficit.To balance the budget,what would the government need to do with the level of government spending and taxes? How would these changes in government spending and taxes affect aggregate demand and the economy?

Table 16-4 -Refer to Table 16-4.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2013 and in 2014 if the Congress and the president do not use fiscal policy.If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2014,which of the following will be lower than if the Congress and the president had taken no action?

Tax increases on business income decrease aggregate demand by decreasing

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.

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant.)

Which of the following is an appropriate discretionary fiscal policy if equilibrium real GDP falls below potential real GDP?

The federal budget deficit acts as an automatic stabilizer because

Which of the following statements about the Social Security,Medicare,and Medicaid programs is true?