Exam 16: Fiscal Policy

Table 16-2 -Refer to Table 16-2.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 want to keep real GDP at its potential level in 2014,they should

In an open economy,the government purchases multiplier will be

If real GDP is $300 billion below potential GDP and the tax multiplier equals -1.5,then how much would the government need to change taxes to bring the economy to equilibrium at potential?

An increase in government spending will force an appreciation of the dollar,which causes net exports to fall.

An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

Figure 16-7 -Refer to Figure 16-7.Given that the economy has moved from A to B in the graph above,which of the following would be the appropriate fiscal policy to achieve potential GDP?

Some economists argue that the federal government should normally run a deficit at potential GDP,with the borrowed funds applied to

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.9,the tax rate equals 0.25,and the marginal propensity to import equals 0.15.

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Expansionary fiscal policy

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

If policy makers are concerned that the economy is in danger of rising inflation because aggregate demand is increasing faster than aggregate supply,the appropriate fiscal policy response is to

During most of the years of the Great Depression,the actual federal budget was in ________,and the cyclically adjusted budget was in ________.

Crowding out refers to a decline in ________ as a result of an increase in ________.

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

Part of the spending on the Caldecott Tunnel project in northern California came from the American Reinvestment and Recovery Act,which is an example of ________ aimed at increasing real GDP and employment.

A tax rebate,which is expected to be offered in this and all future years,will