ECON macro: ch.16

Which of these is an example of an automatic stabilizer?

An unemployment benefit program.

The decline in private expenditures that results from an increase in government purchases is known as:

Crowding out.

When the tax rate increases, the size of the multiplier effect:

Decreases. WHY? - The higher the tax rate, the smaller the amount of any increase in income that households have available to spend, which in turn reduces the size of the multiplier effect.

Which of these fiscal policy actions will increase real GDP in the short run?

An increase in government expenditures.

Which of these statements about the federal debt is the most accurate?

At some point the government may have to raise taxes or cut spending to pay interest on the debt.

Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.

Automatic stabilizers.

Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

Increasing income tax rates.

We would expect the tax multiplier to be __________ in absolute value than the government purchases multiplier.

Smaller.

Which of these statements is true about using fiscal policy to stabilize the economy?

The delay caused by the legislative process is typically longer for fiscal than monetary.

The national debt is best measured as the:

Total value of U.S treasury securities outstanding.

The cyclically adjusted budget deficit is measured...:

as if the economy were at potential real GDP.

Every time the federal government runs a budget deficit, the Treasury must:

borrow funds from savers by selling U.S Treasury securities.

The tax multiplier equals the change in:

equilibrium GDP divided by the change in taxes.

When the economy is in a recession, the government can:

Increase government purchases or decrease taxes in order to increase aggregate demand.

The American Recovery and Reinvestment Act of 2009 is a clear example of:

Expansionary fiscal policy.

Government policies that increase aggregate demand are called __________.

Expansionary policies.

Changes in the federal tax rate or changes in government spending designed to achieve some macroeconomic policy objective are known as:

Fiscal policy.

All the programs that Congress authorizes on an annual basis, which are not automatically funded by the prior laws passed by Congress, are called __________.

Discretionary spending.

Which of these is the main reason for the long-run funding problems of Social Security? -Too many workers are delaying retirement until past age 65 -The number of workers per retiree continues to decline -The health of the typical american is declining

The number of workers per retiree continues to decline.

The largest and fastest growing category of federal expenditures is __________.

Transfer payments.