Exam 16: Fiscal Policy

If government increases taxes by the same amount it increases government spending,there will be no effect on aggregate demand: the increase in government spending is offset by an equal decrease in consumption spending by households.

If the federal budget has an actual budget surplus of $75 billion,but a cyclically adjusted budget surplus of $50 billion,then the economy must be above potential real GDP.

To complement actions by the Fed to reduce inflation,Congress and the President can cut spending and/or raise taxes.

If tax reduction and simplification are effective,then

Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion.If the president and Congress increased government purchases by $500 billion,what would be the result on the economy?

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

Expansionary fiscal policy will

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to ________ and investment to ________.

Reducing the marginal tax rate on income will

The income tax system serves as an automatic stabilizer over the course of the business cycle.

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

An equal increase in government purchases and taxes will cause

Table 16-2 -Refer to Table 16-2.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy.If Congress and the president want to keep real GDP at its potential level in 2017,they should

What is meant by crowding out? Explain the difference between crowding out in the short run and in the long run.

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

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?

The largest and fastest-growing category of federal government expenditures is

Which of the following is an objective of fiscal policy?

An increase in the money supply is a discretionary fiscal policy which will increase aggregate demand.

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