Microeconomics Chapter 30

Fiscal policy refers to the

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

The American Recovery and Reinvestment Act of 2009 was implemented primarily to

stimulate aggregate demand and employment.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000

$100 billion

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is:

$275 billion

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is:

3.9 percent

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. A budget surplus occurred in year:

6

The group of three economists appointed by the President to provide fiscal policy recommendations is the

Council of Economic Advisers

The public debt is held as:

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

Which of the following represents the most expansionary fiscal policy?

a $10 billion increase in government spending

An appropriate fiscal policy for a severe recession is

a decrease in tax rates.

An appropriate fiscal policy for severe demand-pull inflation is

a tax rate increase

The amount by which government expenditures exceed revenues during a particular year is the

budget deficit.

The amount by which Federal tax revenues exceed Federal government expenditures during a particular year is the

budget surplus

The American Recovery and Reinvestment Act of 2009

implemented a $787 billion package of tax cuts and government expenditure increases

Discretionary fiscal policy is so named because it

involves specific changes in T and G undertaken expressly for stabilization at the option of Congress

Since 2002, the United States has had

large Federal budget deficits

A contractionary fiscal policy is shown as a

leftward shift in the economy's aggregate demand curve

The political business cycle refers to the possibility that

politicians will manipulate the economy to enhance their chances of being reelected.

A major advantage of the built-in or automatic stabilizers is that they

require no legislative action by Congress to be made effective

The public debt is the amount of money that

the Federal government owes to holders of U.S. securities.