Exam 10: Fiscal Policy and Debt

An economy is operating at long-run equilibrium. What is the MOST likely result of an aggressive expansionary fiscal policy?

When the economy is underperforming and policymakers pursue expansionary fiscal policy, they express a willingness to trade off _____ output for a _____ price level.

Changes in taxes first cause changes in _____, and thus the government tax multiplier is _____ than the government spending multiplier.

In recent years, countries such as China have been _____ U.S. debt as a way to keep their currencies from _____ against the U.S. dollar.

Of the U.S. national debt that is held by the public, _____ hold about ____.

Fiscal policy that focuses on shifting the long-run aggregate supply curve to the right is _____ policy.

According to the Laffer curve, what tax rate will maximize tax revenue?

During which decade did the U.S. public debt exceed its GDP?

U.S. interest on its national debt, measured as a percentage of GDP, rose during the _____ and fell during the _____.

The graph that plots hypothetical tax revenues at various income tax rates is commonly called the _____ curve.

Countries such as China often purchase U.S. debt to keep their currencies from falling against the U.S. dollar.

A practical implication of the crowding-out effect is that it

As market interest rates rise, the cost of the public debt

Which fiscal policy time lag can occur when the legislative process works slowly?

The _____ lag is the time required to turn fiscal policy into law to have an impact on the economy.

One way to increase aggregate supply and economic growth is to repeal regulations that have more costs than benefits to businesses.

According to the government budget constraint equation, when the government runs a surplus, three things can happen: the money supply _____, the government _____ bonds, or the government _____ assets.

Which fiscal policy time lag is caused by the fact that GDP data are not immediately available?

Suppose the U.S. government decides to pay off all of its debt. Which of these would NOT be a consequence of this action?

Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the _____ effect.