Exam 27: Fiscal Policy

Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009, approximately ________ took the form of tax cuts and ________ took the form of increases in government expenditures.

Which of the following best describes supply-side economics?

A tax rebate, which is expected to be offered in this and all future years, will

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

The federal budget exhibited a $128.7 billion surplus in 2001 but moved to a deficit of $157.8 billion in 2002. Some argued the deficit was opened up because of the Bush 2001 tax cuts, but others argued that the deficit grew because of the recession suffered in 2001. Evaluate the validity of the second argument.

Historically, the largest U.S. federal budget deficits as a percentage of GDP in the 20th century occurred during

What is expansionary fiscal policy? What is contractionary fiscal policy?

An increase in the sensitivity of private spending (consumption, investment, and net exports) to changes in the interest rate ________ the government purchases multiplier.

An equal increase in government purchases and taxes will cause

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

Calculate the government purchases multiplier if the marginal propensity to consume equals 0.75, the tax rate is 0.2, and the marginal propensity to import equals 0.3.

Figure 27-11 -A change in consumption spending caused by income changes is ________ change in spending, and a change in government spending that occurs to improve roads and bridges is ________ change in spending.

Figure 27-11 -The tax multiplier equals the change in ________ divided by the change in ________.

A government tax rebate of $1,000 would ________ your disposable income by ________.

In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. This indicates that a ________ increase in government purchases would increase equilibrium real GDP by $157 billion

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9. What is the government spending multiplier?

Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?

Increases in government spending result in ________ in the short run, and permanent increases in government spending result in ________ in the long run.

Calculate the value of the government purchases multiplier if the marginal propensity to consume equals 0.8, the tax rate equals 0.2, and the marginal propensity to import equals 0.05.

A(n) ________ in private expenditures as a result of a(n) ________ in government purchases is called crowding out.