Exam 20: Fiscal Policy and Monetary Policy

If the federal government has a budget surplus,then it is definitely the case that

If real GDP exceeds potential GDP,to move the economy to potential GDP the Fed

When the Fed raises the federal funds rate,

The annual statement of the outlays,tax revenues,and surplus or deficit of the government of the United States is the federal

The use of discretionary fiscal policy is hampered by I.difficulty of estimating the level of potential GDP. Ii.lack of accuracy of economic forecasts. Iii.the small impact tax cuts and increases in government expenditure have on aggregate demand.

The FOMC is concerned about inflation and has ________ the federal funds rate.Due to substitution effects,other ________ interest rates will ________ almost immediately.

If the Fed is concerned about inflation,its actions ________ long-term interest rates so that investment ________ and net exports ________.

Induced taxes are defined as taxes

When the Fed worries about inflation,it ________ the federal funds rate and,in the short run,________ the real interest rate.

-An economy is at a short-run equilibrium as illustrated in the above figure.An appropriate fiscal policy option to move the economy to full employment is to

A fiscal stimulus works to close a recessionary gap by shifting the

When the Federal Reserve increases the federal funds rate,bank loans ________,the supply of loanable funds ________,and the real interest rate ________.

In an expansion,federal tax receipts increase proportionally more than real GDP without the need for any government policy.This increase is an example of

Explain the difference between discretionary and automatic fiscal policy.Provide examples of each.

If a tax cut increases people's labor supply,then

Ignoring any supply-side effects,suppose the government is considering cutting taxes by $100 billion or increasing government expenditures on goods and services by $100 billion.Then

When government outlays are less than tax revenues,the government has

President Reagan often stated he preferred supply side policies.Which of the following federal government policies would be considered supply side? I.decrease the quantity of money Ii.lower taxes Iii.lower the interest rate

When the Fed increases the federal funds rate,

Which of the following is a limitation of discretionary fiscal policy? I.lawmaking lags Ii.estimating potential GDP Iii.income gap