Exam 16: Fiscal Policy

Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion.If the president and the Congress increased government purchases by $500 billion,what would be the result on the economy?

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

The largest source of federal government revenue in 2012 was

Figure 16-12 -Refer to Figure 16-12.An increase in government purchases of $200 billion causes aggregate demand to shift ultimately from AD₁ to AD₂.Assuming a constant price level,the difference in real GDP between point A and point B will be ________ $200 billion.

Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy? A significant

As a percentage of GDP,federal expenditures ________ from 1950 to the early 1990s,________ from 1992 to 2001,and have ________ since 2001.

Identify each of the following as (i)part of an expansionary fiscal policy,(ii)part of a contractionary fiscal policy,or (iii)not part of fiscal policy. a.The personal income tax rate is lowered. b.Congress cuts spending on defense. c.College students are allowed to deduct tuition costs from their federal income taxes. d.The corporate income tax rate is lowered. e.The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.

Historically,the largest U.S.federal budget deficits as a percentage of GDP in the 20th century occurred during

Figure 16-8 -Refer to Figure 16-8.In the graph above,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 Congress and the president use to move the economy to point C?

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

Raising taxes on interest and dividend income will increase the level of investment and economic growth.

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability,high rates of economic growth,and high employment.

Which of the following would be classified as fiscal policy?

Suppose real GDP is $13 trillion and potential real GDP is $13.5 trillion.If Congress and the president increase government purchases by $500 billion,then the economy will be brought to equilibrium at potential real GDP.

Expansionary fiscal policy involves

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

Which of the following is an objective of fiscal policy?

The tax wedge is the difference between the

A decrease in the tax rate will ________ the disposable income of households and ________ the size of the multiplier effect.