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ch 22 econ test
Terms in this set (30)
Your Economics teacher lectures the class about an economic scenario where the economy is at full employment and growing. What is another name to describe this situation?
An expansionary gap
You apply for a summer internship with the Fed, and are excited to hear that you have been selected to participate. Throughout your internship, WHAT are the majority of your experiences going to be connected to?
Directing monetary policy
What economic practice is employed to increase aggregate demand?
Expansionary fiscal policy
Fiscal policy is the MOST relevant to which group and related event?
Members of Congress and the Federal Budget
The U.S. income tax follows a _____ tax code structure?
Which method would MOST likely be employed by John Maynard Keynes to pull the nation out of a recession?
Spend your way out
Following a recent election, certain U.S. congressional members feel a mandate to introduce new fiscal policy. In committee, the notion of implementing transfer payments as a tool is considered. Using transfer payments, WHAT economic metrics may be influenced?
Both answers are correct
An increase in infrastructure projects, such as new parks and roads, initiated by the federal government is a likely signal that WHAT condition is present in the U.S. economy?
All of these answers are correct
Fiscal policy that is intended to offset fluctuations in economic activity without direct intervention from policymakers are referred to as _____.
A think tank of prominent economists are meeting during an economic recession. Many competing ideas are presented for debate. Based on your knowledge, which strategy is MOST likely to be selected to promote economic expansion?
Stimulating aggregate demand
Contractionary fiscal policy is a set of government tools used to _____ aggregate demand during a period of inflation.
In order to help the economy grow, the Fed decides to make changes to the reserve ratio. What type of policy does this refer to?
Who suggested that government intervention should focus on influencing aggregate demand when dealing with an economic recession?
John Maynard Keynes
Sales tax paid by consumers is an example of a _____ tax.
Classical economists were MOST likely challenged by thoughts emerging from:
the Keynesian Revolution.
During an election season town hall meeting, a hopeful future U.S. congresswoman is talking about specific issues that she hopes to change, if elected. Which item IS an objective that would be within her scope as an elected official to affect change?
Both tax rates and government spending
What is the economic term for a simultaneous increase in tax rates and cuts in government spending?
A fiscal cliff
Which item is an example of an automatic stabilizer designed to promote larger budget deficits during recessions and larger surpluses during expansions?
Both answers are correct
Aggregate demand is BEST defined as the total level of demand for goods and services by:
All answers are correct
A new presidential administration advocates for the U.S. Congress to consider presenting fiscal policy centered on decreasing government spending. Which term accurately describes this type of fiscal policy?
The U.S. Congress is considering making a substantial change to tax rates. What type of policy does this refer to?
A candidate for local government holds a meeting with community members and advocates for tax cuts. This policy can be seen as a step to implement WHAT type of fiscal policy?
What policy recommendation is MOST likely to be advocated by a classical economist during a recession?
The government should do nothing to help the economy
When the AD and the SRAS intersect to the left of the vertical LRAS, economists call this:
A contractionary gap.
An automatic stabilizer is BEST defined as _____.
a type of fiscal policy that automatically kicks in without the discretion of policymakers
According to Keynesian economists, if policymakers thought the economy was headed into a recession, what action would be most appropriate?
A planned increase in the budget deficit.
Which of the following reduces the effects of expansionary fiscal policy?
Higher interest rates that decrease private investment.
What are the primary goals of fiscal and monetary policy?
Maintain full employment, keep inflation under control, and drive economic growth.
Why is an 'expansionary gap' sometimes referred to as an 'inflationary gap'?
When actual output exceeds its long-run potential, inflation is the result.
What is a progressive tax code?
One where high-income people are taxed at a higher rate
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