Chapter 13 Study Guide

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When the Federal government uses taxation and spending actions to stimulate the economy it is conducting:

Fiscal Policy

When the Federal government takes action to change taxes and spending to stimulate the economy such policy is:

Discretionary

When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is:

Nondiscretionary

When the Federal government cut taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be:

Countercyclical

Fiscal policy is enacted through changes in:

Taxation and government spending

Which group has a direct responsibility for providing analysis, advice and assistance to the U.S. President on economic matters?

Council of Economic Advisors

If the Congress passes legislation to decrease government spending to control demand-pull inflation, then this would be an example of a(n):

Concretionary fiscal policy

Which combination of fiscal policy actions would be most simulative for an economy in a deep recession?

Decrease in taxes, increase Government spending

Which combination of fiscal policy actions would be most contractionary for an economy experiencing severe demand-pull inflation?

Increase taxes, decrease Government spending

Which is an example of an automatic stabilizer? As real GDP decreases, income tax revenues:

Increase

With a progressive tax system, as the level of income increases in an economy, the average tax rate will:

Increase

Which is regarded as an automatic stabilizer in the economy?

Anything that increases the government's budget deficit (or reduces its budget surplus) during a recession and increases its budget surplus (or reduces its budget deficit) during an expansion without requiring explicit action by policymakers

Crowding-out is the notion that:

Deficit financing will increase the demand for money, increase the interest rate, and reduce the level of investment spending in the economy.

The public debt is the:

The accumulation of all past Federal deficits and surpluses.

How is the public debt calculated?

By adding all of the past debts together.

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