Exam 16: Fiscal Policy

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

Assuming a fixed amount of taxes and a closed economy,calculate the value of the government purchases multiplier,the tax multiplier,and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

Figure 16-6 -Refer to Figure 16-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Expansionary fiscal policy will

If the economy is falling below potential real GDP,which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that ________,the government purchases multiplier would be lower than the administration's estimate,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that ________,the multiplier would be higher than the administration's estimate.

The federal government debt as a percentage of GDP did not rise

The government purchases multiplier will be larger if the marginal income tax rate decreases.

A permanent tax cut would likely ________ consumption spending ________ than would a tax rebate like the one issued in 2008.

The federal government debt equals

From an initial long-run equilibrium,if aggregate demand grows faster than long-run and short-run aggregate supply,then Congress and the president would most likely

To combat a recession with discretionary fiscal policy,Congress and the president should

The fastest growing category of government expenditure is

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?

Active changes in tax and spending by government intended to smooth out the business cycle are called ________,and changes in taxes and spending that occur passively over the business cycle are called ________.

Federal government purchases,as a percentage of GDP,

During recessions,government expenditure automatically

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