Exam 18: Fiscal Policy

Economists who believe the supply-side effects of tax cuts are small essentially believe that

If the economy is falling below 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

As spending on government purchases increases,income rises and money demand falls.

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

What is expansionary fiscal policy? What is contractionary fiscal policy?

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.

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

Of the $825 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009,the largest spending increase occurred in which category?

Federal government expenditures,as a percentage of GDP,

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

The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises.

A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

In the long run,most economists agree that a permanent increase in government spending leads to

The budget deficit increases during wars and recessions.

Increasing the federal budget deficit will contribute to increasing the federal government debt.

The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy was

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

From an initial long-run equilibrium,if aggregate demand grows more slowly than long-run and short-run aggregate supply,then Congress and the president would most likely

Lowering the individual income tax will increase household disposable income and consumption spending.

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.