Exam 28: Managing Aggregate Demand: Fiscal Policy

A conservative who was opposed to an increase in the size of the government sector but believed in the Keynesian approach to aggregate demand management would most likely favor which of the following expansionary policies?

Government transfer payments

With regard to GDP, residential property taxes are an example of ____ taxes.

Government purchases have the same multiplier effect as business investment spending.

If the value of the multiplier is smaller, the economy

If a "liberal" wanted to decrease aggregate demand, which of the following would she tend to favor?

Which of the following is one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Why did President George W.Bush feel the need for a stimulus package for the U.S.economy after September 11, 2001? As a conservative, what type of fiscal stimulus would be most appealing to President Bush?

Supply-side tax cuts also tend to reduce aggregate demand and promote recession.

In 2006 and 2007 the U.S.faced an inflationary gap which would suggest the use of restrictive fiscal policy.

In the determination of disposable income, transfer payments are treated as if they

Define the following terms and explain their significance to the study of macroeconomics: a.fiscal policy b.transfer payments c.effect of income taxes on the multiplier d.supply-side tax cuts

Figure 11-1 -In Figure 11-1, to achieve equilibrium at potential GDP the government could

Taxes constitute the difference between GDP and disposable income.

A major complication with fiscal policy to control aggregate demand is the

Productivity increases, brought about by increased education and training, may shift the aggregate supply curve outward.

Decreasing aggregate demand to eliminate an inflationary gap often creates the problem of

An increase in taxes shifts the

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

What are the policies usually advocated by supply side economists? How do they justify these proposals?