Exam 18: Fiscal Policy

In a recession,some aspects of fiscal policy can stimulate aggregate demand without deliberate actions of policymakers.This occurs as a result of:

Lags associated with monetary policy are generally longer than lags associated with fiscal policy.

Which statement does NOT limit the effectiveness of fiscal policy?

When the government conducts fiscal policy,it makes up for a decrease in $\vec { C }$ with:

If Ricardian equivalence holds,then an expansionary fiscal policy will:

Which statement is TRUE about the difference between monetary and fiscal policy?

In the short run,an increase in government spending growth will cause the inflation rate to:

Many economists believe that the most harmful consequence of continuing to finance high budget deficits through borrowing is the upward pressure placed on interest rates.Explain this argument.(That is,explain why higher budget deficits may lead to higher interest rates and why this may be detrimental to the economy in the long run. )

Mistimed contractionary fiscal policy can cause:

When countries have severe debt problems:

Use the following to answer questions Figure: Aggregate Demand and Fiscal Policy -(Figure: Aggregate Demand and Fiscal Policy)Refer to the figure.In the best case scenario,effective fiscal policy would take which action to correct an economy in recession at point Z?

Use the following to answer questions Figure: Aggregate Demand and Fiscal Policy -(Figure: Aggregate Demand and Fiscal Policy)Refer to the figure.In the best case scenario,an economy in a recession at point Y would use fiscal policy to increase spending growth to:

A decrease in consumption growth will cause inflation to fall in:

Bond-financed expansionary fiscal policy is least likely to be effective when the private sector is reluctant to spend or invest.

Debt can be such a problem that:

A decrease in consumption growth will cause the LRAS curve to:

What can happen when a government continues to use expansionary fiscal policy even as government debt becomes a problem?

Which fiscal stimulus policy will provide a greater incentive to work?

Fiscal policy is most desirable if the economy returns to its long-run equilibrium immediately after a shock occurs.

When consumers are very reluctant to spend in a recessionary environment,the government's MOST effective strategy is to: