Fiscal Policy

Which is a frequently used tool of fiscal policy?

Changes in government purchases.

This policy involves involves decreasing government purchases and/or increasing taxes.

Contractionary fiscal policy

This policy involves increasing government purchases and/or decreasing taxes.

Expansionary fiscal policy

This policy involves involves increasing government purchases and/or decreasing taxes.

Expansionary fiscal policy

Fiscal policy relies on three assumptions: 1. Recognizing the start of a recession. 2. Government quickly determines effective policy. 3. The policy is immediately effective. Which of these assumptions hold in the real world?

None of the assumptions hold in the real world.

The application of fiscal policy to decrease aggregate demand is called _ fiscal policy.

contractionary

The application of fiscal policy to increase aggregate demand is called _ fiscal policy.

expansionary

One of the most frequently used tools of fiscal policy is changing:

government purchases.

In the United States, the structure of taxation and social safety-net programs:

provides an automatic response to changes in real GDP that mirrors active fiscal policy.

Because the U.S. Federal income tax is a progressive tax, as income _ (increases/decreases) average federal tax rates increase.

rises or increases

Government _ policy has limitations that reduce its effectiveness and may even cause the opposite of what was intended.

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called:

fiscal policy.

In the short run, in order to stimulate aggregate demand and avoid falling output and prices, the government could _ taxes.

lower, reduce, drop, cut, or decrease

In the short run, in order to stimulate aggregate demand and avoid falling output and prices, the government could reduce _.

taxes or tax

Fiscal policy is:

the changes in government purchases and/or taxes designed to achieve full employment and low inflation.