Exam 18: Fiscal Policy

Because of the multiplier effect,if a shock causes aggregate demand to increase by $200 million,then the government should _____ in order to restore the economy back to its original growth rate.

Fiscal policy is especially effective when used to combat real shocks.

Examples of automatic stabilizers include:

As a result of consumption smoothing,a temporary tax rebate tends to create a:

Federal government grants to state governments can:

When $\vec { C }$ falls,the aggregate demand curve:

Fiscal policy is:

In working to correct a recession with fiscal policy,the government can:

Which provides an automatic stabilizer when the economy is declining?

Economists who believe that fiscal policy can be effective in smoothing business cycles also believe strongly in the idea that "supply creates its own demand."

Expansionary fiscal policy can reduce real growth if the increase in government spending:

Crowding out:

As the savings rate in the private sector rises:

A tax cut causes the AD curve to shift to the right.

A temporary investment tax credit tends to:

The multiplier effect occurs when a change in government spending raises the incomes of people,who in turn increase their spending.

The difficulties of using fiscal policy to affect the economy include:

Examples of expansionary fiscal policy include increases in:

An increase in government spending growth will cause the AD curve to:

Which theory states that a tax cut does NOT affect aggregate demand because people save all they gain from the tax cut?