Module 20 Review

A. An expansionary fiscal policy.

An income tax rebate is an example of a. an expansionary fiscal policy. b. a contractionary fiscal policy. c. an expansionary monetary policy. d. a contractionary monetary policy. e. none of the above.

Fiscal policy that reduces aggregate demand. The 3 forms include: (1) a reduction in government purchases of goods and services, (2) an increase in taxes, and (3) a reduction in government transfers.

Define contractionary fiscal policy and list its three forms.

Fiscal policy that increases aggregate demand. The 3 forms include: (1) increase in government purchases of goods and service, (2) a cut in taxes, and (3) an increase in government transfers.

Define expansionary fiscal policy and list its three forms.

Contractionary; it's a reduction in government purchases of goods and services.

Determine whether the policy is an expansionary or contractionary fiscal policy: several military bases around the country, in which together employ tens of thousands of people, are closed.

Contractionary; it is an increase in taxes, which will reduce disposable income.

Determine whether the policy is an expansionary or contractionary fiscal policy: the federal tax on gasoline is increased.

Expansionary; it is an increase in government transfers that will increase disposable income.

Determine whether the policy is an expansionary or contractionary fiscal policy: the number of weeks an unemployed person is eligible for unemployment benefits is increased.

Expansionary; - decrease taxes. - increase government purchases of goods and services.

In a recessionary gap, what type of fiscal policy is appropriate? List the three variables the government can change to implement fiscal policy.

Contractionary; -

In an inflationary gap, what type of fiscal policy is appropriate? List the three variables the government can change to implement fiscal policy.

Increase government spending.

State how you would solve this problem using fiscal policy: the national unemployment rate has increased by 1% for the last three years.

Contractionary.

State which fiscal policy is appropriate: in response to world pressure, the government drops its order for new missiles.

Expansionary.

State which fiscal policy is appropriate: the government cuts personal income taxes.

Contractionary.

State which fiscal policy is appropriate: the government eliminates tax incentives for business.

Expansionary.

State which fiscal policy is appropriate: the government increases its orders for a new missile defense system.

Contraction art in the short run, expansionary in the long run.

State which fiscal policy is appropriate: the government increases personal income taxes in response to a budget deficit.

E. I, II, and III

Which of the following contributes to the lag in implementing fiscal policy? I. It takes time for Congress and the President to pass spending and tax changes. II. Current economic data take time to collect and analyze. III. It takes time to realize an output gap exists. a. I only b. II only c. III only d. I and III only e. I, II, and III

B. Decreasing government spending.

Which of the following is a fiscal policy that is appropriate to combat inflation? a. decreasing taxes b. decreasing government spending c. increasing government transfers d. increasing interest rates e. expansionary fiscal policy

E. All of the above.

Which of the following is a government transfer program? a. Social Security b. Medicare/Medicaid c. unemployment insurance d. food stamps e. all of the above

B. Increasing government spending.

Which of the following is an example of expansionary fiscal policy? a. increasing taxes b. increasing government spending c. decreasing government transfers d. decreasing interest rates e. increasing the money supply