Exam 19: Debates in Macroeconomics Over the Role and Effects of Government

The stimulus bill passed by the U.S.Congress in February 2009,is an example of

Economist A says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap.Government should either raise its _____________ or cut ___________________.I believe the government spending multiplier is ____________ than the tax multiplier,so I favor _____________________.

"If we come to a company's rescue this time,they'll take more risks and we'll have to come to their rescue next time,too." The economist who said this most likely

Economists who are in favor of smaller government tend to prefer ________________ when expansionary _______________ policy is needed to raise aggregate demand.

Economist B says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap.Government should either raise its __________ or cut _________________.I believe the tax multiplier is larger than the government spending multiplier,so I suggest government ___________________.

At the time that the stimulus bill was passed by the U.S.Congress in February 2009,some economists argued that

Economist B says all of the following: Expansionary fiscal policy is needed to raise aggregate demand and remove the economy from a recessionary gap.The choice of fiscal policy measures is between more government spending and a ___________ in taxes.Since I am in favor of smaller government,I choose a __________________ in __________________.

According to many economists,if wages are _________________,the economy _____________ remove itself from a recessionary gap,and thus ____________ government intervention is needed.

If the (average)tax rate is cut by 10%,and as a result the tax base rises by 15%,tax revenues will rise.

One area of disagreement among economists is the impact that income tax cuts will have on a budget deficit.Explain in detail the reasoning of both sides of this argument.

Economists who are in favor of an increase in the size and scope of government tend to prefer ________________ when expansionary _______________ policy is needed to raise aggregate demand.

"Demand-side fiscal policy is capable of changing Real GDP." This statement would be most likely to be said by an economist who believes that

Those economists who view the AS curve as being vertical see more government tools capable of raising Real GDP than do the economists who view the AS curve as being upward-sloping.

According to the standard textbook Keynesian analysis,which is greater: the tax multiplier or the government spending multiplier? Explain the reasoning behind this relationship.

Suppose that a $30 billion increase in government spending increases Real GDP by $150 billion,and that a $10 billion tax reduction increases Real GDP by $60 billion.In this situation,the tax multiplier is _______________ the government spending multiplier.

Suppose that a $4 billion increase in government spending increases Real GDP by $60 billion,and that a $3 billion tax reduction increases Real GDP by $39 million.In this situation,the tax multiplier is _______________ the government spending multiplier.

If the aggregate supply curve is vertical,it follows that a change in

A rise in government spending could

Economist A says that the economy is self-regulating.This economist most likely believes that

Which of the statements is false?