Exam 13: Fiscal Policy in the Short Run

Expansionary fiscal policy would involve ________,whereas contractionary fiscal policy would involve ________.

If the MPC is 0.8 and the tax rate is 20%,the expenditure multiplier will equal

Figure 13.1 -Refer to Figure 13.1.All else equal,a decrease in government purchases would best be represented by a movement from

If the government is running a cyclically adjusted budget deficit,________ fiscal policy is ________ because aggregate expenditure is increasing.

Figure 13.1 -Refer to Figure 13.1.All else equal,a decrease in income taxes would best be represented by a movement from

C = $750 + 0.75(1 - 0.4)Y I = $600 G = $500 NX = -$50 Use the above data to: a. Calculate the equilibrium level of GDP. b. Calculate the value of the expenditure multiplier. c. Find the change in the initial equilibrium GDP if autonomous investment increases by $75. d. Find the change in the initial equilibrium GDP if autonomous government purchases decreases by $50. e. Find the change in the initial equilibrium GDP if autonomous net exports increase by $10.

Other things equal,an increase in corporate income taxes will ________ the after-tax profitability of investment projects,which leads to ________ in output and employment.

Suppose the economy is initially at full employment with real GDP equal to potential GDP.Use the IS-MP model and the Phillips curve to explain what happens if the economy experiences a recession both with and without automatic stabilizers.

Suppose you are paid a wage of $50 per hour.If your marginal income tax rate is 20%,then for every additional hour you work,your tax wedge is

C = $5 million + 0.9(1 - 0.1)Y I = $7 million G = $6 million NX = $1 million Based on the above data,the value of the expenditure multiplier is

Assume the economy is initially in equilibrium with real GDP equal to potential GDP.Other things equal,if the economy enters a recession and there are automatic stabilizers,the initial decrease in investment expenditure resulting from the recession is ________ what the decrease would be without automatic stabilizers,and the multiplier is ________ what the multiplier would be without automatic stabilizers.

The difference between the pretax and post-tax return to an economic activity is known as the

Other things equal,which of the following will lead to an increase in output and employment?

If the MPC is 0.9 and the tax rate is 15%,a $100 increase in autonomous investment will increase equilibrium income by

Figure 13.1 -Refer to Figure 13.1..All else equal,an increase in transfer payments would best be represented by a movement from

Typically,discretionary fiscal policy changes have to be approved by the parliament so a detailed proposal needs to be put forward by the government; parliamentary approvement may take a significant amount of time.As a result,________ for fiscal policy can be several months longer than for monetary policy.

Assume the economy is initially in equilibrium with real GDP equal to potential GDP.Other things equal,if the economy enters a recession,automatic stabilizers

An increasing federal budget deficit will ________ the federal government debt as this will ________ the total value of Canadian government bonds outstanding.

C = $40 million + 0.6(1 - 0.2)Y I = $35 million G = $31 million NX = -$6 million Based on the above data,the equilibrium level of GDP is

Suppose the federal budget surplus for the year was $350 billion and the economy were in an economic expansion.If the economy had been at potential GDP,it is estimated that tax revenue would have been $140 billion lower and government spending on transfer payments would have been $50 billion higher.Using these estimates,the cyclically adjusted budget