Chapter 16
Active changes in tax and spending by government intended to smooth out the business cycle are called ________, and changes in taxes and spending that occur passively over the business cycle are called ________.
A. discretionary fiscal policy; automatic stabilizers
Social Security began as a "pay−as−you−go" system, meaning that payments to current retirees were paid
A. from taxes collected from current workers.
Social Security
A. is a system whereby current retirees are paid from taxes collected from current workers.
President Trump's proposed increase in spending on infrastructure projects is an example of discretionary fiscal policy aimed at increasing
A. real GDP and employment.
Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment.
A. taxes; expenditures
Which of the following would be considered a fiscal policy action?
B. A tax cut is designed to stimulate spending during a recession.
The increase in the amount the government collects in taxes when the economy expands and the decrease in the amount the government collects in taxes when the economy goes into a recession is an example of
B. automatic stabilizers.
The three categories of federal government expenditures, in addition to government purchases, are
B. interest on the national debt, grants to state and local governments, and transfer payments.
________ and ________ are the largest sources of revenue collected by the federal government.
C. Individual income taxes; social insurance taxes
Government transfer payments include which of the following?
C. Social Security and Medicare programs
Which of the following is a government expenditure, but is not a government purchase?
C. The federal government pays out an unemployment insurance claim.
Which of the following is an objective of fiscal policy?
C. high rates of economic growth
Which of the following is more likely to be effective in increasing the growth rate of real GDP?
C. permanent cuts in business taxes
The largest and fastest−growing category of federal government expenditures is
C. transfer payments.
Fiscal policy refers to changes in
D. federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
