Exam 27: Fiscal Policy

Figure 27-1 -Refer to Figure 27-1.Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from A) A to B. B) B to C. C) C to B. D) B to A. E) A to E.

The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy was

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

From the 1960s to 2010,transfer payments

In the long run,most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.

Social Security began as a "pay-as-you-go" system,meaning that payments to current retirees were paid

The largest and fastest-growing category of federal government expenditures is

The automatic budget surpluses and budget deficits that occur in the federal budget over the business cycle

The tax multiplier equals the change in ________ divided by the change in ________.

Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?

The three categories of federal government expenditures,in addition to government purchases,are

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

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

An increase in individual income taxes ________ disposable income,which ________ consumption spending.

The Social Security and Medicare programs have been a failure in terms of reducing poverty among elderly U.S.citizens.

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because

The majority of the federal government debt is held by government agencies.

Figure 27-2 -Refer to Figure 27-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

The multiplier effect refers to the series of