Exam 20: Fiscal Policy and Monetary Policy

When the FOMC raises the federal funds rate,almost immediately ________ and a few weeks later the ________.

What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?

An economy is experiencing a recession and policymakers are considering using discretionary fiscal policy to eliminate the recessionary gap.What are the four limitations that policymakers face when using discretionary fiscal policy? Briefly discuss each.

A reason why discretionary fiscal policy might move the economy away from potential GDP instead of toward potential GDP is that

When tax revenue ________ outlays is negative,then the government has a budget ________.

When the economy is in recession,does the Fed want to raise the federal funds rate so as to increase aggregate demand and increase real GDP? Explain your answer.

In order to help the economy recover from a recession using fiscal policy,the government can ________ so that aggregate demand increases.

If the economy is in equilibrium with real GDP less than potential GDP,there is ________ gap and a fiscal policy that ________ is appropriate.

If the government uses fiscal policy to close a recessionary gap,government

"As the saying goes,the only sure things in life are death and taxes.This saying points out the result that everything having to do with taxes is an automatic fiscal policy." Is the preceding analysis correct or incorrect? Explain your answer.

Discretionary fiscal policy is a fiscal policy action,such as

In order for the United States to use discretionary fiscal policy to deal with a recessionary gap,

A hike in the federal funds rate results in ________ in the real interest rate,which leads to ________ in investment.

If the Fed raises the federal funds rate,eventually the

Government tax revenues ________ during an expansion and ________ during a recession,which leads to larger budget deficits during the ________ phase of the business cycle.

The balanced budget multiplier is

Which of the following is true?

The Fed raises the federal funds rate when it

The figure above shows a nation's aggregate demand curve,aggregate supply curve,and potential GDP. -In the figure above,to use fiscal policy to move the economy back to potential GDP,the government must increase government expenditure by ________ $1 trillion and/or decrease taxes by ________ $1 trillion.

Explain how tax revenue can be both an automatic fiscal policy and a discretionary fiscal policy.