Exam 27: Fiscal Policy

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Historically,the largest U.S.federal budget deficits as a percentage of GDP in the 20th century occurred during

Fiscal policy refers to changes in

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.

Figure 27-9 -Refer to Figure 27-9.Given that the economy has moved from point A to point B in the graph above,which of the following would be the appropriate fiscal policy to achieve potential GDP?

Suppose that Congress allocates $5 billion to an "energy-efficient appliance rebate" program.It also raises taxes by $5 billion to keep the deficit from growing.If the marginal propensity to consume is 0.8,what is the effect on equilibrium GDP?

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.8,the tax rate equals 0.2,and the marginal propensity to import equals 0.05.

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

Figure 27-6 -Refer to Figure 27-6.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,Congress and the president would most likely

Included in government expenditures are government purchases and transfer payments.

If the federal government's expenditures are less than its tax revenues,then

Compared to the averages for post World War II recessions,the recession of 2007-2009 was ________ in duration and the decline in real GDP was ________.

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

Consider the following statement,"The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Figure 27-6 -Refer to Figure 27-6.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,Congress and the president would most likely pursue

Suppose the president is successful in passing a $5 billion tax increase.Assume that taxes are fixed,the economy is closed,and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

If Congress passed a one-time tax cut in order to stimulate the economy in 2014,and tax rate levels returned to their pre-2014 level in 2015,how should this tax cut affect the economy?

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.