Econ final
Domestic consumers of the exported good pay
A higher price and purchase a smaller quantity of it
The world trade organization determines that dumping has occurred if
A product is exported for a lower price than it sells in a home market
fiscal stimulus is
A) expansionary fiscal policy, such as increases in government spending and tax cuts designed to reduce unemployment and increase output.
Discretionary fiscal stimulus
Alters government spending or taxes
How is an unemployment benefit program an example of automatic fiscal policy?
Because automatic stabilizers are govt spending and taxes that automatically increase or decrease depending on the phase of the business cycle. These benefits would increase during recession to keep recession's impact from being severe
A fiscal cliff does not include
Beginning of an automatic spending increase in domestic budget
How does the corporate income tax influence potential gdp and real gdp growth rate
Corporate income tax decreases level of potential gdp and slows real gdp growth rate
Everything else remaining the same, an increase in government spending will
Decrease investment
A tax hike on labor income will
Decrease potential gdp and weaken incentive to work
The federal government passing legislation that extends transfer payments is an example of
Discretionary fiscal policy
When a country opens up to free international trade
Domestic producers of the exported good receive a higher price and sell a greater quantity of it
The present value of a government's commitments to pay benefits minus the present value of tax revenues
Fiscal imbalance
Generational imbalance is the division of
Fiscal imbalance between the current and future generations assuming they will enjoy existing levels of taxes and benefits
The tax wedge is
Gap created by a tax between what buyers pay and what a seller receives
An increase in infrastructure spending will
Increase employment and decrease unemployment
Which fiscal policy might a government try if the economy is operating at too high a level of output?
Increase incone tax rates
An increase in infrastructure spending
Increases employment and decreases unemployment
The fiscal cliff
Increases the labor market tax wedge and decrease level of employment
Why would most economists not be in favor of a balanced federal budget mandate?
It would tie the hands of government and not allow for automatic and discretionary fiscal policy action to move the economy out of the recession
Discretionary fiscal stimulus is
Legislation involved and increases government spending and tax cuts in order to increase aggregate demand
Receipts come from 4 sources
Personal income taxes, social security taxes, corporate income taxes, and indirect taxes
Fiscal imbalances is
Present value of the government's commitments to pay benefits minus the present value of its tax revenues
In the short run, an increase in government expenditure will
Shift the aggregate demand curve rightward and increase real gdp
Tarifff generates greater revenues, the
Steeper is demand and the steeper is supply
Cyclical surplus or deficit occurs because
Tax revenues and outlays are not at their full employment levels
The government budget tends to decline during the expansion phase of a business cycle because
Tax revenues increase and govt transfer payments decrease
The sugar quota in the U.S creates winners and losers. The winners are
U.S sugar producers and losers are consumers
A tax wedge is the difference between
What a buyer pays and what a seller receives
cyclical deficit
a federal budget deficit that is caused by a recession and the consequent decline in tax revenues
Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.
automatic stabilizers
If taxes exactly equaled government expenditures the
budget deficit would be zero
Fiscal policy
changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives
Structural deficit
federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy
The Laffer curve illustrates that, in some circumstances, the government can reduce a tax on a good and increase the
government's tax revenue
Automatic fiscal stimulus
policy action triggered by the state of the economy with no government action
Fiscal imbalance is the ______ value of the government's commitments to pay benefits minus the ______ value of its tax revenues.
present, present
Income taxes in the United States are part of automatic fiscal policy because
tax revenues increase when income increases, thus offsetting some of the increase in aggregate demand
Supply side theory
the belief that lower taxes and fewer regulations will stimulate the economy and can either create or destroy incentives to work
Government expenditure multiplier
the effect of a change in government expenditure on goods and services on equilibrium real GDP
Tax Multiplier
the ratio of change in the equilibrium level of output to a change in taxes