Exam 27: Fiscal Policy

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?

Which of the following is considered expansionary fiscal policy?

Which of the following is an objective of fiscal policy?

Suppose real GDP is $13 trillion and potential real GDP is $13.5 trillion. If Congress and the president increase government purchases by $500 billion, then the economy will be brought to equilibrium at potential real GDP.

Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential,

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

Which of the following would be classified as fiscal policy?

Which of the following is considered contractionary fiscal policy?

Double taxation refers to

Figure 27-10 -Refer to Figure 27-10. In the graph above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Congress and the president use to move the economy to point C?

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

Economists who believe the supply-side effects of tax cuts are small essentially believe that

During recessions, government expenditure automatically

The multiplier effect refers to the series of

Social Security

In the case of an upward-sloping aggregate supply curve, the change in real GDP brought about by a change in government spending will be less than that predicted by the simple government purchases multiplier.

Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, Congress and the president would need to decrease taxes by

Tax cuts on business income ________ aggregate demand.

Table 27-3 -Refer to Table 27-3. 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 use fiscal policy successfully to keep real GDP at its potential level in 2014, which of the following will be higher than if the Congress and the president had taken no action?

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment.