Study sets, textbooks, questions
Upgrade to remove ads
Macro Econ Chapter 18
Terms in this set (14)
Fiscal policy is conducted by _________ and involves __________.
The federal government
Government spending and taxes
Identify all of the statements that are examples of fiscal policy.
- There is an increase in income tax rates
- The estate tax is repealed
- Government increases military spending
- Public money is used to build a high-speed train that connects Los Angeles and Las Vegas
The government of Balearic is concerned about a recession, so it decides to implement expansionary fiscal policy. How would this policy be depicted in an AD-AS model?
Expansionary fiscal policy would...
Shift the AD curve to the right
Which best describes why the multiplier exists?
When people spend money, that money ends up in the pockets or bank accounts of other people or organizations, who then use that money in some way
Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's.
Move the supply and/or demand curves to describe the expected effect that this deficit-reduction likely had upon the loanable funds market.
As a result, private investment should have.....
Shift the D curve to the left one
Increased because the cost of borrowing decreased
In the context of budget deficits, what is crowding out?
Which of the following is an example of crowding out?
When government borrowing leads to higher interest rates and corresponding decreases in private investment
A firm that chooses not to borrow money to invest in new machinery because government borrowing has contributed to high interest rates
The graph shows the market for loanable funds.
Show the effect of an increase in government borrowing by shifting the proper curve.
What is the effect of this change on the interest rate?
What is the effect of this change on consumption spending?
What is the effect of this change on private investment spending?
Shift the demand curve to the right one
Classify each item as associated with the government cutting taxes or the government increasing spending.
The government cuts taxes
- Increases private-sector spending
- Often results in increased paying down of private debt
- Supported by those who think the government spends too much
The government increases spending
- Temporarily removes funding from the private sector
- Funds infrastructure spending and public goods
- Supported by those who think the government does not spend enough
Which is the best characterization of the theory of Ricardian equivalence?
Which is the best example of behavior predicted by the theory of Ricardian equivalence?
People change their consumption and saving decisions in response to budget deficits or surpluses
An individual that increases saving in response to a tax cut in anticipation of future tax increases
Label each of the examples of fiscal policy lags.
In December 2008, the Business Cycle Dating Committee of the National Bureau of Economic Research determined that the U.S. economy had been in recession since the fourth quarter of 2007 (when economic activity peaked).
President George W. Bush released his tax relief agenda in February 2001. Following the debate in Congress, the Economic Growth and Tax Relief Reconciliation Act was signed into law in June 2001.
In September 1959, President Dwight D. Eisenhower signed the Federal Employees Health Benefits Act, which established a voluntary health insurance plan for approximately two million employees and their dependents, with costs to be shared by the Federal Government and the employees. The Act became effective in July 1960.
Which describes the role of automatic stabilizers in the economy?
Automatic stabilizers have a similar impact as discretionary fiscal policy but occur automatically, without action by the government. Automatic stabilizers increase aggregate demand during recessions and reduce aggregate demand during expansions
Categorize the scenarios as either a discretionary act or the result of automatic stabilizers.
- Legislators increase the generosity of unemployment benefits
- A law is enacted that increases government spending on health-care programs
- Economic growth increases personal and corporate income, increasing tax payments
- A recession increases the number of recipients of unemployment benefits
Suppose that an increase in government spending causes aggregate demand to increase from AD1 to AD2 in the graph.
Which choice is the best explanation as to why aggregate demand would continue to expand to AD3 assuming that the government does not continue to increase spending?
The multiplier effect
Which of the statements is TRUE?
Fiscal policy is more effective when a recession is caused by inadequate aggregate demand
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Krugman's Economics for AP*
David Anderson, Margaret Ray
Paul Krugman, Robin Wells
Solutions Manual for Use with Essentials of Investments
Alan J. Marcus, Alex Kane, Bruce Swensen, Zvi Bodie
Sets with similar terms
Chapter 13: Fiscal Policy
Macroeconomics Chapter 13/14 Test
ECONOMICS CH. 8
Econ: Chapter 27
Sets found in the same folder
ECON 202 - Chapter 10 & 11
Macro Econ Chapter 9
Macroeconomics ch 17
Econ exam 1
Other sets by this creator
Audit - Problem 7-28
Auditing Exam 2
Auditing Exam 1
Macro Econ Chapter 17
In country A, the population is 300 million and 50 million people are living below the poverty line. What is the poverty rate?
How is equilibrium price related to market equilibrium? Refer to your completed cluster diagram.
How do trade unions and industrial unions differ?
When transactions do not occur due to price or quantity controls, what is the term for the lost gains? A. wasted resources B. inefficient quality C. price wedge D. black market losses E. deadweight loss
Other Quizlet sets
nac 1- neuro assessment
Human Anatomy: Digestive
Anatomy Quiz #6
PHYSIOLOGY 2 -- RESPIRATORY
"An excellent way to reduce unemployment is to enact tariff on imported goods."
In the case of public goods, those who do not contribute for the creation of the public good cannot be excluded from enjoying the benefits of the good. This is called..
If you start at point A on D1, what is the percentage change in quantity demanded when price falls from $30 to $20? Use the midpoint formula to calculate this percentage change.
The annual plan outlining proposed revenues and expenditures for the federal government for the coming year