Fiscal Policy Macroeconomics quizlet
If the MPS in an economy is .4, government could shift the aggregate demand curve leftward by $50 billion by: A.reducing government expenditures by $125 billion. B.reducing government expenditures by $20 billion. C.increasing taxes by $50 billion. D.increasing taxes by $250 billion.
B
A contractionary fiscal policy is shown as a: A.rightward shift in the economy's aggregate demand curve. B.rightward shift in the economy's aggregate supply curve. C.movement along an existing aggregate demand curve. D.leftward shift in the economy's aggregate demand curve.
D
Built-in stability is synonymous with discretionary fiscal policy. True False
False
13.If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by: A.increasing government spending by $4 billion. B.increasing government spending by $40 billion. C.decreasing taxes by $4 billion. D.increasing taxes by $4 billion
a
Which of the following represents the most expansionary fiscal policy? A.a $10 billion tax cut B.a $10 billion increase in government spending C.a $10 billion tax increase D.a $10 billion decrease in government spending
b
11.Refer to the above diagram, in which Qf is the full-employment output. If the economy's present aggregate demand curve is AD2: A.The most appropriate fiscal policy is an increase of government expenditures or a reduction of taxes. B.the most appropriate fiscal policy is a reduction of government expenditures or an increase of taxes. C.government should undertake neither an expansionary nor a contractionary fiscal policy. D.the economy is achieving its maximum possible output.
c
16.A major advantage of the built-in or automatic stabilizers is that they: A.simultaneously stabilize the economy and reduce the absolute size of the public debt. B.automatically produce surpluses during recessions and deficits during inflations. C.require no legislative action by Congress to be made effective. D.guarantee that the Federal budget will be balanced over the course of the business cycle.
c
20.Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward: A.an equality of tax receipts and government expenditures. B.an excess of tax receipts over government expenditures. C.an excess of government expenditures over tax receipts. D.a reduction of subsidies and transfer payments and an increase in tax rates.
c
22.Discretionary fiscal policy refers to: A.any change in government spending or taxes that destabilizes the economy. B.the authority that the President has to change personal income tax rates. C.changes in taxes and government expenditures made by Congress to stabilize the economy. D.the changes in taxes and transfers that occur as GDP changes
c
Contractionary fiscal policy is so named because it: A.involves a contraction of the nation's money supply. B.necessarily reduces the size of government. C.is aimed at reducing aggregate demand and thus achieving price stability. D.is expressly designed to contract real GDP.
c
Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. If GDP is $400: A.there will be a budget deficit. B.there will be a budget surplus. C.the budget will be balanced. D.the macroeconomy will be in equilibrium.
c
15.Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? A.a Congressional proposal to incur a Federal surplus to be used for the retirement of public debt B.a reduction in agricultural subsidies and veterans' benefits C.a postponement of a highway construction program D.a reduction in Federal tax rates on personal and corporate income
d
17.In an aggregate demand-aggregate supply diagram, equal decreases in government spending and taxes will: A.shift the AD curve to the right. B.increase the equilibrium GDP. C.not affect the AD curve. D.shift the AD curve to the left.
d
21.Suppose the price level is fixed, the MPC is .8, and the GDP gap is a negative $320 billion. To achieve full-employment output (exactly), government should: A.increase government expenditures by $320 billion. B.increase government expenditures by $80 billion. C.reduce taxes by $320 billion. D.reduce taxes by $80 billion.
d
Refer to the above diagram, in which Qf is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at: A.AD0. B.AD1. C.AD2. D.AD3.
d
The U.S. public debt: A.refers to the debts of all units of government—Federal, state, and local. B.consists of the total debt of U.S. households, businesses, and government. C.refers to the collective amount that U.S. citizens and businesses owe to foreigners. D.consists of the historical accumulation of all Federal government deficits less surpluses.
d
Which of the following best describes the built-in stabilizers as they function in the United States? A.The size of the balanced-budget multiplier varies inversely with the level of GDP. B.Personal and corporate income tax collections automatically fall and transfers and subsidies automatically rise as GDP rises. C.Personal and corporate income tax collections and transfers and subsidies all automatically vary inversely with the level of GDP. D.Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
d
Refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in billions. This diagram portrays the idea of: A.progressive taxation. B.built-in stability. C.the balanced-budget multiplier. D.discretionary fiscal policy.
b
18.Assume that aggregate demand in the economy is excessive, causing demand-pull inflation. Which of the following would be most in accord with appropriate government fiscal policy? A.an increase in Federal income tax rates B.an increase in the size of income tax exemptions for each dependent C.passage of legislation providing for the construction of 8,000 new school buildings D.an increase in soil conservation subsidies to farmers
a
3.The amount by which government expenditures exceed revenues during a particular year is the: A.public debt. B.budget deficit. C.full-employment. D.GDP gap.
b
4.Countercyclical discretionary fiscal policy calls for: A.surpluses during recessions and deficits during periods of demand-pull inflation. B.deficits during recessions and surpluses during periods of demand-pull inflation. C.surpluses during both recessions and periods of demand-pull inflation. D.deficits during both recessions and periods of demand-pull inflation.
b
9.Refer to the above diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it is experiencing: A.a positive GDP gap. B.a negative GDP gap. C.inflation. D.an adverse supply shock.
b