Chapter 17

_____________________ 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.

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be

a budget deficit.

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

A ______________________ means that government spending and taxes are equal.

balanced budget

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

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a

budget surplus.

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

In 2020, Microsoft will pay corporate income tax to the federal government based on the company's __________________.

corporate profits

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

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes?

income tax is a progressive tax

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 _______________ in proportion to the magnitude of the changes.

increase

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

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

The time lag for monetary policy is typically ________________ the time lag for fiscal policy.

shorter than

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

the standardized employment budget