ECON-200 Ch 13 Study Guide
Refer to the graph above. What combination would most likely cause a shift from AD1 to AD2?
A decrease in taxes and an increase in government spending
One important consequence of the public debt in the United States is that
it transfers a portion of real output to foreign nations
Fiscal policy refers to the
manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.
Refer to the diagram above. The economy is at equilibrium at Point C, what fiscal policy would increase real GDP?
Increase aggregate demand from AD1 to AD2 by increasing government spending
An expansionary fiscal policy may be
Partially offset by the crowding-out effect
In the united states, income taxes and transfer payments
act as automatic stabilizers for fluctuations in income
Expansionary fiscal policy is so named because it
is designed to expand real GDP
If Congress passes legislation to raise taxes to control demand-pull inflation then this would be an example of
contractionary fiscal policy
The crowding-out effect suggests that
increases in government spending may raise the interest rate and thereby reduce investment.
The set of fiscal policies that would be most contractionary would be a
decrease in government spending and an increase in taxes
Due to automatic stabilizers, when the nation's total income rises, government transfer spending:
decreases and tax revenues increase
If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n):
expansionary fiscal policy
An expansionary fiscal policy can be illustrated by an
increase in aggregate demand
When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is:
nondiscrectionary
The Council of Economic Advisors gives economic advice to the
president
The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a
recognition lag
In an aggregate demand and aggregate supply graph an expansionary fiscal policy can best be illustrated as
rightward shift in the aggregate demand curve
Fiscal policy is enacted through changes in
taxation and government spending
One timing problem with fiscal policy to counter a recession is a "operational lag" that occurs between the:
time the need for fiscal action is recognized and the time that the action is taken
One timing problem with fiscal policy to counter a recession is a "administrative lag" that occurs between the:
time the need for the fiscal action is recognized at the time that the action is taken