Macro Economics Final
The public debt is the:
Accumulation of all past deficits minus all past surpluses
The following are important problems associated with the public debt, except:
Government borrowing to finance the debt may lead to too much private investment
A budget surplus means that:
Government revenues are greater than expenditures in a given year
Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that:
Help offset changes in GDP
Due to automatic stabilizers, when the nation's total income rises, government transfer spending:
Decreases and tax revenues increase
A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.
False
Demand-pull inflation can be restrained by increasing government spending and reducing taxes.
False
The goal of expansionary fiscal policy is to rein in inflation.
False
A tax reduction of a specific amount will be more expansionary the:
larger is the economy's MPC.
Which of the following represents the most expansionary fiscal policy?
A $10 billion increase in government spending.
Which of the following fiscal policy changes would be the most contractionary?
A $10 billion increase in taxes and a $30 billion cut in government spending
Which of the following fiscal policy changes would be the most expansionary?
A $40 billion increase in government spending
How is the public debt calculated?
By cumulating the annual difference between tax revenues and government spending over the years
Crowding out is a decrease in private investment caused by
Increased borrowing by the government
Crowding out is a decrease in private investment caused by:
Increased borrowing by the government
The crowding-out effect suggests that:
Increases in government spending may reduce private investment
Fiscal policy is enacted through changes in:
Taxation and government spending
Which of the following serves as an automatic stabilizer in the economy?
The progressive income tax
A contractionary fiscal policy shifts the aggregate demand curve leftward.
True
Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.
True
Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.
True
If the MPC in the economy is .75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.
True
A specific reduction in government spending will dampen demand-pull inflation by a greater amount the:
smaller is the economy's MPS.