Exam 11: Fiscal Policy and the Public Debt

Suppose the government pursues expansionary fiscal policy by lowering tax rates.What are the expected demand-side effects? What are the possible offsets to the demand-side effect? How might supply-side effects change these results?

Suppose the economy is at an equilibrium on the LRAS curve and the government increases spending.In the short run one would expect

Suppose the economy is currently in short-run and long-run equilibrium.Describe the process of how the government "crowds out" private investment even further than if in a recession.

When interest rates decrease in Canada,the value of the dollar is likely to

During which time should the multiplier be largest?

If the government increases aggregate demand when the economy is at both short-run and long-run equilibrium,the full long-run effect of this fiscal policy will be to

A country reports that its government spending is $950 billion while tax revenues total $500 billion.Does the country have a budget surplus or deficit and what is the surplus or deficit?

If the government wants to increase real GDP levels,it could

Suppose there are two policy options facing a vote in Parliament.In the first,government spending will increase $50 billion,while the second option is to cut taxes by $50 billion.A Keynesian economist would argue for

Automatic stabilizers are

If the government decreases taxes,then the

The crowding-out effect refers to the tendency of expansionary fiscal policy to

If the economy is at an output level below the LRAS curve,which of the following fiscal policies would likely lead to a higher equilibrium level of real GDP in the short run?

Explain,along with an appropriate graphical representation,what a fiscal policy is and how it is implemented through a change in government spending and a change in taxes.

Fiscal policy may end up being destabilizing to an economy because

Suppose there is a contractionary gap and the economy is in equilibrium on the SRAS at an output level beyond the economy's long-run real GDP.In the short run,if the government increases spending then

The possibility of indirect crowding out suggests that,if the government wants to engage in expansionary policy,it must

Lower marginal tax rates can increase total tax revenues is a tenet of

Explain how fiscal policy can correct a contractionary gap.

If the economy is at an output level above the LRAS curve,which of the following fiscal policies would likely lead to a lower equilibrium level of real GDP in the short run?