Exam 18: Fiscal Policy

Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion.To move the economy back to potential GDP,Congress should

Which of the following would be classified as fiscal policy?

Suppose the government spending multiplier is 2.The federal government cuts spending by $40 billion.What is the change in GDP if the price level is not held constant?

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?

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Figure 18-2 -Refer to Figure 18-2.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely pursue

Suppose Political Party A proposes a tax cut on business income to stimulate the economy.Political Party B opposes the tax cut on business income asserting that it would only help businesses,not the average working man and woman.If you were hired as an economist for Political Party A,explain how the tax cut on business income would help the average working man and woman.

Figure 18-3 -Refer to Figure 18-3.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely

Figure 18-1 -Refer to Figure 18-1.Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above,this would be depicted as a movement from

If real GDP is $300 billion below potential GDP and the tax multiplier equals -1.5,then how much would the government need to change taxes to bring the economy to equilibrium at potential?

The government purchases multiplier equals the change in ________ divided by the change in ________.

During the Great Depression,what appeared to be ________ fiscal policy was actually not when the ________ budget deficit or surplus is examined.

Social Security began as a "pay-as-you-go" system,meaning that payments to current retirees were paid

If real equilibrium GDP is above potential GDP,expansionary fiscal policy should be pursued.

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion.To move the economy back to potential GDP,Congress should

Automatic stabilizers refer to

If real GDP exceeded potential real GDP and inflation was increasing,which of the following would be an appropriate fiscal policy?

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

The level of crowding out associated with a tax cut will be smaller if the tax change has a supply-side effect than it will be if it only has a demand-side effect.