ECON 2105 Final
automatic fiscal policy
a fiscal policy action triggered by the state of the economy with no government action
discretionary fiscal policy
a policy action that is initiated by an act of congress
the time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as...
a recognition lag
for a tax rate below T*
a rise in the tax rate increases tax revenue
which of these fiscal policy actions will increase real GDP in the short run?
an increase in government expenditures
which of these is an example of an automatic fiscal policy?
an unemployment benefit program
taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called...
automatic fiscal policy
every time the federal government runs a budget deficit, the government must...
borrow, which adds to the government debt
changes in tax rates impact the economy through...
both aggregate demand and aggregate supply
a government that collects more in taxes than it spends experiences a...
budget surplus
a "credible business plan" for the government to adopt is a plan to...
decrease government expenditure
which of these is the main reason for long-run funding problems of Social Security?
demographic changes
the American Recovery and Reinvestment Act of 2009 is a clear example of...
discretionary fiscal stimulus
congress can pass budget laws only once a year
false
which of the following statements about US government receipts is correct?
federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades
supply-side effects
fiscal policy has important effects on employment, potential gdp and aggregate supply
employment act of 1946
fiscal policy operates within the framework of this; it is the continuing policy and responsibility of the fed govt to use all practicable means to coordinate and utilize all its plans, functions and resources to promote maximum employment, production and purchasing power
government policies that increase aggregate are called...
fiscal stimulus
one of the primary goals of most governments with regard to the economy is...
full employment
The components of government outlays and receipts which have changed most to contribute to the huge budget deficits in 2011 and 2012 are
government expenditure and transfer payments
which type of fiscal policy would cause the AD curve to move rightward?
higher government spending
total government sector
includes state and local governments as well as the federal government
when the economy is at full employment, a cut in household taxes will...
increase consumption
when the economy is in a recession, the government can...
increase government purchases or decrease taxes in order to increase aggregate demand
according to supply-side theory, fiscal policymakers can combat the impact of recessions by...
lowering tax rates
Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal policy?
making the initial budget proposals in February
the council of economic advisers
monitors and keeps the President and the public well informed about the current state of the economy and the best available forecasts of where it is heading; this economic intelligence activity is one source of data that informs the budget-making process
most economists would ____________________ a balanced federal budget mandate.
not be in favor of
which of these are the largest sources of federal government revenues?
personal income taxes and social security taxes
receipts come from...
personal income taxes, social security taxes, corporate income taxes and indirect taxes. personal income taxes are LARGEST source of receipts
the federal govt's budget balance equals...
receipts minus outlays
we would expect the tax multiplier to be _________________ in absolute value than purchases multiplier.
smaller
the government debt is best measured as the...
sum of past budget deficits minus the sum of past budget surpluses
__________________ maintains that tax policy can either create or destroy incentives to work, save and invest.
supply-side theory
what 2 items in the government budget change automatically in response to the state of the economy?
tax revenues, needs-tested spending
supply-side economics emphasizes the role that ____________________ play in the supply of output in the economy.
taxes
cyclical surplus or deficit
that actual surplus or deficit minus the structural surplus or deficit; in recessions and expansions; occurs purely because . real GDP does not equal potential GDP
many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to...
the presence of time lags
fiscal imbalance
the present value of the governments commitments to pay benefits minus the present value of its tax revenues
Laffer Curve
the relationship between the tax rate and the amount of tax revenue collected
at the tax rate T*
the tax revenue is maximized
government debt
the total amount that the government has borrowed; sum of past deficits minus past surpluses
fiscal stimulus
the use of fiscal policy to increase production and employment; can be automatic or discretionary
fiscal policy
the use of the federal budget to achieve macroeconomic objectives, such as full employment, sustained economic growth and price level stability
what happens when government spending is greater than government revenues?
there is borrowing by the government and the government debt rises
many economists believe that increases in government debt are not necessarily problematic if the funds are used...
to build infrastructure
if outlays exceed receipts...
to govt has a budget deficit
supply-side economists point to the Laffer curve as evidence that higher taxes...
can lead to overall government revenues
the decline in private expenditures that results from an increase in government borrowing is known as...
crowding out
in 2008, spending on social security, medicare and medicaid was less than 10% of the GDP. by 2030 this amount is expected to be around 17% of GDP. one government option to solve this problem is to...
decrease benefits
budget deficits automatically _______________________ during recessions and _____________________ during expansions.
increase, decrease
which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?
increasing income tax rates
the structural budget or deficit...
is measured as if the economy were at full employment
who makes fiscal policy?
the President and Congress
federal budget
the annual statement of the federal government's outlays and tax revenues; has two purposes: to finance federal government programs and activities and to achieve macroeconomic objectives
structural surplus or deficit
the budget balance that would occur if the economy were at full employment and real GDP were equal to potential GDP
generational imbalance
the division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits
tax wedge
the gap created between the before-tax and after-tax wage rates
if receipts equal outlays...
the govt has a balanced budget
if receipts exceed outlays...
the govt has a budget surplus
the largest and fastest growing category of federal expenditures is...
transfer payments
outlays are...
transfer payments, expenditure on goods and services and debt interest; transfer payments are the LARGEST item of outlays
congress attempted to grant the president a line-item veto in 1996 but the supremes court declared this unconstitutional in 1998
true
congress debates and amends the president's budget proposals and enacts a budgets before the start of the fiscal year on october 1
true
the president proposes a budget to congress each february
true