Exam 27: Fiscal Policy

In a closed economy with fixed or autonomous (non-income dependent)taxes,the balanced budget government purchases multiplier is negative.

An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to decrease the money supply.

The fastest growing category of government expenditure is

From the 1960s to 2014,transfer payments

If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

If we include consideration of potential effects of a proposed tax reduction and simplification on the labor supply,we would expect crowding out of investment and net exports brought about by the tax cut to be

Double taxation refers to

Figure 27-4 -Refer to Figure 27-4.In the graph above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?

Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced.What will happen to real equilibrium GDP?

Crowding out,following an increase in government spending,results from (the exchange rate is the foreign exchange price of the domestic currency)

The income tax system serves as an automatic stabilizer over the course of the business cycle.

A decrease in the tax rate will ________ the disposable income of households and ________ the size of the multiplier effect.

A tax rebate,like the one issued in 2008,is likely to ________ consumption spending ________ than would a permanent tax cut.

Figure 27-2 -Refer to Figure 27-2.In the graph above,if the economy is at point A,an appropriate fiscal policy by Congress and the president would be to

Figure 27-1 -Refer to Figure 27-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to decrease taxes by

Which of the following is considered expansionary fiscal policy?

if government spending and the price level increase,then

A change in consumption spending caused by income changes is ________ change in spending,and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

If the economy is growing beyond potential real GDP,which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in