Exam 18: Fiscal Policy

Which of the following would increase the size of the government purchases multiplier?

If the tax multiplier is -1.5 and a $200 billion tax increase is implemented,what is the change in GDP,holding everything else constant? (Assume the price level stays constant. )

Figure 18-4 -Refer to Figure 18-4.In the graph above,the shift from AD₁ to AD₂ represents the total change in aggregate demand.If government purchases increased by $50 billion,then the distance from point A to point B ________ $50 billion.

Congress and the president carry out fiscal policy through changes in

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

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Expansionary fiscal policy

An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes.

The largest source of federal government revenue in 2010 was

Which of the following best describes supply-side economics?

Which of the following provides health-care coverage to people age 65 and over?

Tax cuts on business income increase aggregate demand by increasing

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that during wartime,the government purchases multiplier would be ________ the administration's estimate,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that when short-term interest rates are near zero,the multiplier would be ________ the administration's estimate.

Figure 18-1 -Refer to Figure 18-1.An increase in taxes would be depicted as a movement from ________,using the static AD-AS model in the figure above.

The use of fiscal policy to stabilize the economy is limited because

Table 18-1 -Refer to Table 18-1.Suppose the economy is in the state described by the table above.What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and aggregate supply diagram to illustrate the appropriate fiscal policy to use in this situation.

In absolute value,the tax multiplier is greater than the government purchases multiplier.

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued.Using the static AD-AS model in the figure above,this would be depicted as a movement from

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?

From the 1960s to 2010,transfer payments