Exam 13: Fiscal Policy Appendix Taxes and the Multiplier

If the marginal propensity to consume is 0.8 and government transfers decrease by $50 million, then equilibrium GDP will decrease by:

Spending for Medicare and Medicaid accounts for approximately _____ of federal spending.

Which of the following is the largest source of tax revenue for the U.S. federal government?

To close a recessionary gap with fiscal policy, the government could:

Discretionary fiscal policy is the direct result of deliberate actions by policy makers rather than an automatic adjustment.

If the government's revenues are greater than its expenditures, then it has a budget:

Use the following to answer questions: Figure: Fiscal Policy I -(Figure: Fiscal Policy I) Look at the figure Fiscal Policy I. Suppose that this economy is in equilibrium at E₂. If there is an increase in taxes_____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.

Real GDP equals $400 billion, the government collects 25% of any increase in real GDP in the form of taxes, and the marginal propensity to consume is 0.8. If the government decreases spending by $40 billion, real GDP will decrease by:

The national debt:

If the tax rate is 0.1 and the marginal propensity to consume is 0.5, the multiplier is:

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

All of the following are sources of federal tax revenue EXCEPT:

A law requiring the federal budget to be balanced each year would likely:

The effect of a government deficit is:

Discretionary government spending is an automatic stabilizer.

The economy is in a recessionary gap. What are the fiscal policy options available to the government?

If at the beginning of the year the public debt is $12 trillion, government spending and transfers are $2 trillion, and tax revenues are $3 trillion, at the end of the year the public debt is $13 trillion.

Automatic stabilizers are government spending and taxation rules that cause fiscal policy to be automatically contractionary when the economy contracts and automatically expansionary when the economy expands.

If the marginal propensity to consume is 0.75 and transfer payments increase by $30 billion, real GDP will:

In 1999 many European countries signed a stability pact in which they agreed to limit their actual budget deficits to less than 3% of their country's GDP.