Macro Week 13

federal budget deficits

help stabilize the economy during recessions and depression

fiscal policy

can be discretionary or automatic

fiscal policy deals with each of the following except

the money supply

if the MCP is .9 and government spending increases by $10 billion, GDP will rise by $ ____ billion

100

If the MPC is .8, the multiplier is

5

Which of the following is correct?

Conservative economists believe the crowding-out effect is large, while Keynesians believe it is small

an annually balanced budget

Is opposed by many economists because it would require cutting spending and raising taxes during recession, which might very well produce a depression

when government expenditures in a given year are less than tax receipts, there exists

a budget surplus

automatic stabilizers

all of the choices are true about automatic stabilizers

which of the following would require reducing government expenditures and increasing tax rates during a recession

an annually balanced budget policy

expansionary fiscal policy involves

an increase in government spending and/or a decrease in taxes

if the economy dips into a recession

automatic stabilizers will cause tax receipts to fall and transfer payments to rise

the public debt

consists of the historical accumulation of all federal government deficits and surpluses

when there is a recession, the biggest percentage decline would be in

corporate after-tax profits

Because automatic stabilizers exists in the United States economy

during a recession, transfer payments automatically rise and tax revenue drops; during a period of economic recovery, transfer payments fall and tax revenue rises

according to Keynes, if the economy is in a deep recession, an increase in aggregate demand will

increase real GDP without putting significant upward pressure on the price level

the practical significance of the multiplier is that

it magnifies relatively small changes in spending into larger changes in GDP

during a recession, liberal economists would be most in favor of

spending increases

a conservative economist who advocates an active fiscal policy would recommend

tax cuts during recession and reductions in government spending during inflation

which of the following policies should be used to close an inflationary GDP gap

tax increases

as a result of the action of automatic stabilizers

the government budget changes offset changes in national income

fiscal policy includes each of the following except

the money supply

when the economy begins to slip into a recession, the automatic stabilizers cause

transfer payments to increase and tax collections to decline

which statement is true

we have a national debt over $12 trillion

if the federal budget deficit declines, the national debt

will definitely go up