Exam 13: Fiscal Policy Appendix Taxes and the Multiplier

One of the lags associated with fiscal policy is the time it takes to recognize that the economy has developed a recessionary or inflationary gap.

Fiscal policies that require no government action but that are expansionary when the economy contracts and contractionary when the economy expands are known as:

The public ratio of debt to GDP for the United States in 2013 was:

Use the following to answer questions: Figure: Fiscal Policy II -(Figure: Fiscal Policy II) Look at the figure Fiscal Policy II. Suppose that this economy is in equilibrium at E₁. If there is a decrease in government transfers, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.

Use the following to answer questions: Figure: Short-Run Equilibrium -(Figure: Short-Run Equilibrium) Look at the figure Short-Run Equilibrium. Appropriate fiscal policy action is:

Expansionary fiscal policy pushes the aggregate demand curve to the right.

The main problem with the European stability pacts of 1999 and 2011 was that they forced countries to follow contractionary fiscal policies during a recession to keep the budget deficit to the required level.

Use the following to answer questions: Figure: Fiscal Policy Options -(Figure: Fiscal Policy Options) Look at the figure Fiscal Policy Options. If the aggregate demand curve is AD, the most appropriate discretionary fiscal policy is to _____ government spending and _____ income tax rates.

Sales taxes, property taxes, income taxes, and fees of various kinds:

Most economists believe that the government should balance the budget on average, allowing deficit years when the economy is in recession to be offset by surpluses during years of expansion.

If the government spends an extra $5 billion on goods and services, GDP will:

In 2009 Greece received emergency loans from other European countries and the International Monetary Fund. These loans required the Greek government to cut spending, which worsened the Greek recession.

Suppose the economy is in a recessionary gap. A $100 billion _____ is likely to increase real GDP by the largest amount.

The government's budget balance is:

Most economists oppose a constitutional amendment requiring the federal budget to be balanced annually.

_____ occur(s) when government spending results in persistent deficits that necessitate borrowing, leading to a reduction in private investment.

The cyclically balanced budget is an estimate of what the budget balance would be if real GDP were exactly equal to potential output.

Each of the following is an expansionary fiscal policy EXCEPT:

Which of the following is NOT an example of government purchases of goods and services?

Public debt is: