Exam 27: Fiscal Policy

The federal government debt as a percentage of GDP fell during the period

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

Figure 27-2 -Refer to Figure 27-2. In the graph above, if the economy is at point A, an appropriate fiscal policy by the Congress and the president would be to

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

The cyclically adjusted budget deficit calculates the budget surplus or deficit at

Fiscal policy actions that are intended to have long-run effects on real GDP attempt to increase ________ through changing ________.

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

President Bush lowered taxes on capital gains and dividends in 2003. Explain how this might increase aggregate supply.

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

Forecasts by the Congressional Budget Office show spending on Social Security, Medicare, and Medicaid rising from 9.9 percent of GDP in 2013 to ________ percent of GDP in 2087, and by 2087 the federal government will be spending, as a fraction of GDP, ________ on these three programs as it currently spends on all its programs.

In recent economic history, the U.S. federal budget was in surplus during

It is ________ difficult to effectively time fiscal policy than monetary policy because ________.

If Congress wanted to counteract the effects of a recession it could

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.

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the economy back to potential GDP, Congress should

An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

Why will there be less crowding out of private spending by government spending the less sensitive consumption, investment, and net exports are to changes in interest rates?

The federal budget deficit acts as an automatic stabilizer because