Exam 27: Fiscal Policy

A tax rebate,which is expected to be offered in this and all future years,will

The problem causing most recessions is too little

Which of the following is an example of discretionary fiscal policy?

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

If government increases taxes by the same amount it increases government spending,there will be no effect on aggregate demand: the increase in government spending is offset by an equal decrease in consumption spending by households.

In early 2008,the housing crisis and rising oil prices increased the risk of recession in the United States.What fiscal policy action was taken by Congress and the president to counter these events?

The cyclically adjusted budget is calculated at potential GDP.

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

If the economy is slipping into a recession,which of the following would be an appropriate fiscal policy?

When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,a $840 billion package of ________ that was the largest fiscal policy action in U.S.history.

An equal increase in government purchases and taxes will cause

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential

Calculate the government purchases multiplier if the marginal propensity to consume equals 0.8,the tax rate is 0.1,and the marginal propensity to import equals 0.2.

A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

Which of the following is the largest category of federal government expenditures?

During most of the years of the Great Depression,the actual federal budget was in ________,and the cyclically adjusted budget was in ________.

Which of the following would be most likely to induce Congress and the president to conduct expansionary fiscal policy? A significant

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

In an open economy,the government purchases multiplier will be smaller the

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally