ch.17 econ hw answers

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

Progressive Tax

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following?

an increase of 0.5-1.0% in the long-term interest rate

If an economy moves into a recession, causing that country to produce less than potential GDP, then:

automatic stabilizers will cause tax revenue to decrease and government spending to increase.

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:

discretionary fiscal policy

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would

expansionary fiscal policy; lead to a budget deficit

By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid.

in accumulated government debt

If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________.

increase or decrease

If the economy is producing less than its potential GDP, _____________________ will show a smaller deficit than the actual budget.

the standardized employment budget

When increasing oil prices cause aggregate supply to shift to the left, then:

unemployment and inflation increase.

When inflation begins to climb to unacceptable levels in the economy, the government should:

use contractionary fiscal policy to shift aggregate demand to the right

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.

corporate profits