Exam 16: Fiscal Policy

The problem causing most recessions is too little

The federal budget exhibited a $128.7 billion surplus in 2001 but moved to a deficit of $157.8 billion in 2002.Some argued the deficit was opened up because of the Bush 2001 tax cuts,but others argued that the deficit grew because of the recession suffered in 2001.Evaluate the validity of the second argument.

Since the Social Security system began in 1935,the number of workers per retiree has

What is expansionary fiscal policy? What is contractionary fiscal policy?

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 pursue

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut to

If real GDP exceeded potential real GDP and inflation was increasing,which of the following would be an appropriate fiscal policy?

What is meant by crowding out? Explain the difference between crowding out in the short run and in the long run.

An increase in government purchases will increase aggregate demand because

The largest and fastest-growing category of federal government expenditures is

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.8,the tax rate equals 0.2,and the marginal propensity to import equals 0.05.

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus.

A government tax rebate of $1,000 would ________ your disposable income by ________.

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

Tax cuts on business income increase aggregate demand by increasing

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

Prior to the 1930s,the majority of dollars spent by government was spent at the state and local levels.

List the five categories of federal government expenditures.

The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy was