Exam 27: Fiscal Policy

To evaluate the size of the federal budget deficit or surplus over time,it would be best to look at the

Tax cuts on business income ________ aggregate demand.

Suppose the government spending multiplier is 2.The federal government cuts spending by $40 billion.What is the change in GDP if the price level is not held constant?

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that during wartime,the government purchases multiplier would be ________ the administration's estimate,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that when short-term interest rates are near zero,the multiplier would be ________ the administration's estimate.

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant.)

Which of the following is a reason why we should consider the federal national debt a problem?

What is the "tax wedge"?

If Congress passed a one-time tax cut in order to stimulate the economy in 2010,and tax rate levels returned to their pre-2010 level in 2011,how should this tax cut affect the economy?

Calculate the government purchases multiplier if the marginal propensity to consume equals 0.75,the tax rate is 0.2,and the marginal propensity to import equals 0.3.

Increasing the federal budget deficit will contribute to increasing the federal government debt.

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

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

Suppose Political Party A proposes a tax cut on business income to stimulate the economy.Political Party B opposes the tax cut on business income asserting that it would only help businesses,not the average working man and woman.If you were hired as an economist for Political Party A,explain how the tax cut on business income would help the average working man and woman.

An increase in the tax wedge associated with a given economic activity will decrease the level of that activity.

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

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?

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.