Exam 27: Fiscal Policy

In Year 1 suppose the economy is at potential GDP and that the federal budget deficit equals $100 billion.In Year 2 the federal budget deficit rises to $150 billion,but the cyclically adjusted budget deficit falls to $75 billion.How can the actual budget deficit rise and the cyclically adjusted budget deficit fall?

Before the Great Depression of the 1930s,the majority of government spending took place at the ________ and after the Great Depression the majority of government spending took place at the ________.

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,and no fiscal or monetary policy is pursued,then at point B

The tax multiplier is smaller in absolute value than the government purchases multiplier because some portion of the

Tax cuts on business income increase aggregate demand by increasing

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.

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

The impact of crowding out may be the least

As spending on government purchases increases,income rises and money demand falls.

During 1970-1997,the U.S.federal government was

A decrease in which of the following would decrease the tax wedge?

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and the Congress to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what the president and the Congress are attempting to do.

If real GDP exceeded potential real GDP and inflation was increasing,which of the following would be an appropriate fiscal policy?

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation.

The federal government debt equals