Exam 27: Fiscal Policy

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.

Lowering the individual income tax will increase household disposable income and consumption spending.

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.

When President Obama took office in January 2009, he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession. The next month, Congress passed the American Recovery and Reinvestment Act of 2009, an $840 billion package of spending increases and tax cuts that was

The total value of U.S. Treasury bonds outstanding equals

A decrease in which of the following would decrease the tax wedge?

Figure 27-1 -Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long-run equilibrium, this would be depicted as a movement from ________ using the static AD-AS model in the figure above.

The use of fiscal policy to stabilize the economy is limited because

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

A change in tax rates

Figure 27-4 -Refer to Figure 27-4. 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?

Which of the following would be considered an active fiscal policy?

Suppose the federal budget deficit for the year was $100 billion and the economy was in a recession. If the economy had been at potential GDP, it is estimated that tax revenues would have been $60 billion higher and government spending on transfer payments $50 billion lower. Using these estimates, the cyclically adjusted budget

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

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

To combat inflation, Congress and the president should

Crowding out will be greater

The income tax system serves as an automatic stabilizer over the course of the business cycle.

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

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009, approximately one-third took the form of ________ and two-thirds took the form of increases in ________.