Exam 18: Fiscal Policy

When fiscal policy is funded through taxes,government spending primarily crowds out:

In 2008,the Bush administration issued tax rebate checks to taxpayers totaling $78 billion.The majority of households spent a larger percentage of these checks than they saved,thus leading to a big boost in overall growth in spending and output.

An effective way to combat real shocks is to change the growth in government spending.

The lags associated with the Kennedy administration's tax cuts were extremely long.

Suppose the federal government gives taxpayers a tax rebate financed by borrowing.If taxpayers use the tax rebate to pay off their debts,total spending will:

The problem with fiscal policy that is created because of the recognition,legislative,implementation,effectiveness,and the evaluation and adjustment lags is called:

Automatic stabilizers are changes in fiscal policy that affect _____ without the need for explicit action by policymakers.

Increases in government spending are NOT very effective in offsetting real shocks because increases in government spending shift the:

People who think that the government is spending enough will generally prefer that fiscal policy work through tax rebates.

Fiscal policy is MOST effective in offsetting the effects of:

A negative real shock causes the LRAS curve to:

Tax cuts often have an immediate impact on redirecting an economic downturn.

If consumers believe a tax rebate is permanent,they will spend more of it.

The tax rebate of 2008 had a relatively small impact because taxpayers primarily used the rebate to:

Under which circumstance should an economic advisor for a small economy recommend a large increase in government spending?

Another form of expansionary fiscal policy in addition to government spending is:

The best case for fiscal policy occurs when the economy is hit by a real shock.

Ricardian equivalence refers to the case where lower taxes today lead to higher:

When countries have extremely high debt levels,expansionary fiscal policy could cause AD to contract.

Fiscal policy can offset a positive shock to aggregate demand by raising: