Exam 27: Managing Aggregate Demand: Fiscal Policy

Transfer payments are income that is

If the MPC in the United States was low, it would increase the value of the multiplier.

When total expenditures exceed the economy's potential GDP, the proper fiscal policy is to

In contrast to changes in government spending, tax changes affect spending

Changes in government spending

The addition of imports reduces the value of the multiplier.

If personal income tax rates are decreased in an attempt to stimulate spending, we should expect to see

The president wishes not only to increase spending for education by $4 billion but also to maintain a balanced budget. Therefore, taxes will also be increased by $4 billion. What will happen to GDP?

An automatic stabilizer is a feature of the economy that

Most of the taxes collected by governments tend to

Supply-side tax cuts designed to increase investment spending are attractive in theory, but in practice

In 2000, many economists believed that the most serious macroeconomic problem confronting the U.S. economy was an inflationary gap. Which policies would be effective in dealing with this problem?

The central idea of supply-side tax cuts is that certain types of tax cuts will increase

If the economy experiences an unplanned inventory accumulation at the full employment level of GDP, then the economy is in a(n)

Personal income taxes and corporate income taxes are examples of ____ taxes.

The Japanese economy is stuck in a recessionary gap. The proper fiscal policy could include a(n)

Critics of supply-side economics argue that

How does a tax cut affect the expenditure schedule?

When policy makers choose between tax policy and spending policy to affect the level of aggregate demand, they tend to choose on the basis of

To eliminate an inflationary gap, the aggregate demand curve should