Econ Week 10 Gov. Budgets and Fiscal Policy

In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about:

10% of the size of the U.S. GDP in 2009.

At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012?

$0

At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010?

$540 billion

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

. They are all subject to government excise taxes

Which of the following is the percentage of annual US government spending allocated to foreign aid?

1%

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

automatic stabilizers

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. d.

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

shorter than

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the

aggregate demand curve will shift to the right.

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 Canada's economy moves into an expansion while its economy is producing more than potential GDP, then:

automatic stabilizers will decrease government spending and increase tax revenue.

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 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:

budget deficit

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

contractionary

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

decrease

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

discretionary fiscal policy.

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.

estate and gift tax, to next generation

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

The current level of US government accumulated debt, when measured in nominal dollars:

higher than ever before

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

If a country's GDP increases, but its debt also 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 or decrease

Currently, the US government accumulated debt to GDP ratio:

is lower than its historical high point

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

progressive

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

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