Econ Final Ch 16

If the federal​ government's policy is​ successful, what is the effect on the following macroeconomic​ indicators? Actual real​ GDP: Potential real​ GDP: Price​ level: ​Unemployment:

Actual real​ GDP: increases Potential real​ GDP: does not change Price​ level: increases ​Unemployment: decreases

What step can we expect the federal government to take to control inflation? Increase taxes on businesses Contractionary policy Decreases government spending on goods and services All of the above

All of the above

We would expect the federal government to pursue what type of policy in order to move AD 2 to AD2 policy (shift to the right), and reach equilibrium​ (point C) in the second​ period?

Expansionary fiscal policy

The multiplier effect is only a consideration for increases in government purchases. True or False

False

What is the difference between federal government purchases​ (spending) and federal government​ expenditures? Government purchases refer to spending for which no good or service is received. Government purchases are included in government expenditures. Government expenditures are included in government purchases. They are the same.

Government purchases are included in government expenditures.

After September​ 11, 2001, the federal government increased military spending on wars in Iraq and Afghanistan. Is this increase in spending considered fiscal​ policy? Yes. Fiscal policy refers to changes in government spending and taxes. Yes. Increases in defense spending are designed to achieve macroeconomic policy objectives. No. The increase in defense spending after that date was designed to achieve homeland security objectives. No. Fiscal policy refers to changes in interest rates and the money supply.

No. The increase in defense spending after that date was designed to achieve homeland security objectives.

In the long​ run, increases in government purchases result in complete crowding out. partial crowding out. an absence of crowding out. none of the above.

complete crowding out.

One-time tax​ rebates, such as those in 2001 and​ 2008, increase consumption spending by less than a permanent tax cut because​ one-time tax rebates increase taxable income. the multiplier effect. current income. permanent income.

current income.

Each year that the federal government runs a​ deficit, the federal debt ______________. Each year that the federal government runs a​ surplus, the federal debt ______________.

grows shrinks

According to the multiplier effect​, an initial increase in government purchases increases real GDP by ______________ the initial increase in government purchases.

more than

The higher the tax​ rate, the [larger/smaller] the multiplier effect.

smaller

Does government spending ever reduce private​ spending? ​Yes, due to reduced interest rates. ​Yes, due to crowding out. ​No, they are unrelated. ​No, due to crowding out.

​Yes, due to crowding out.

Policy that is specifically designed to affect aggregate supply and increase incentives to​ work, save, and start a​ business, by reducing the tax wedge LOADING... is called labor economics. ​demand-side economics. ​supply-side economics. ​tax-and-spend economics.

​supply-side economics.

What are the gains to be had from simplifying the tax​ code? Greater clarity of the decisions made by households and firms. Resources from the tax preparation industry freed up for other endeavors. Increased efficiency of households and firms. All of the above.

All of the above.

The simple multiplier effect shows the resulting change in real GDP due to an increase in government purchases or a decrease in taxes assuming that the price level is ___________________. In realty, the SRAS is ______________________. As a result, when AD shifts to the right, in reality the change in real GDP will be ______________________ it would be if the price level were constant.

The simple multiplier effect shows the resulting change in real GDP due to an increase in government purchases or a decrease in taxes assuming that the price level is CONSTANT. In realty, the SRAS is UPWARD SLOPING. As a result, when AD shifts to the right, in reality the change in reality GDP will be LESS THAN it would be if the price level were constant.

When is it considered​ "good policy" for the government to run a budget​ deficit? When borrowing is used for​ long-lived capital goods. When borrowing is used for current expenses. When borrowing is used to pay for social insurance programs. All of the above.

When borrowing is used for​ long-lived capital goods.