ECON 2105 Final

automatic fiscal policy

a fiscal policy action triggered by the state of the economy with no government action

discretionary fiscal policy

a policy action that is initiated by an act of congress

the time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as...

a recognition lag

for a tax rate below T*

a rise in the tax rate increases tax revenue

which of these fiscal policy actions will increase real GDP in the short run?

an increase in government expenditures

which of these is an example of an automatic fiscal policy?

an unemployment benefit program

taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called...

automatic fiscal policy

every time the federal government runs a budget deficit, the government must...

borrow, which adds to the government debt

changes in tax rates impact the economy through...

both aggregate demand and aggregate supply

a government that collects more in taxes than it spends experiences a...

budget surplus

a "credible business plan" for the government to adopt is a plan to...

decrease government expenditure

which of these is the main reason for long-run funding problems of Social Security?

demographic changes

the American Recovery and Reinvestment Act of 2009 is a clear example of...

discretionary fiscal stimulus

congress can pass budget laws only once a year

false

which of the following statements about US government receipts is correct?

federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades

supply-side effects

fiscal policy has important effects on employment, potential gdp and aggregate supply

employment act of 1946

fiscal policy operates within the framework of this; it is the continuing policy and responsibility of the fed govt to use all practicable means to coordinate and utilize all its plans, functions and resources to promote maximum employment, production and purchasing power

government policies that increase aggregate are called...

fiscal stimulus

one of the primary goals of most governments with regard to the economy is...

full employment

The components of government outlays and receipts which have changed most to contribute to the huge budget deficits in 2011 and 2012 are

government expenditure and transfer payments

which type of fiscal policy would cause the AD curve to move rightward?

higher government spending

total government sector

includes state and local governments as well as the federal government

when the economy is at full employment, a cut in household taxes will...

increase consumption

when the economy is in a recession, the government can...

increase government purchases or decrease taxes in order to increase aggregate demand

according to supply-side theory, fiscal policymakers can combat the impact of recessions by...

lowering tax rates

Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal policy?

making the initial budget proposals in February

the council of economic advisers

monitors and keeps the President and the public well informed about the current state of the economy and the best available forecasts of where it is heading; this economic intelligence activity is one source of data that informs the budget-making process

most economists would ____________________ a balanced federal budget mandate.

not be in favor of

which of these are the largest sources of federal government revenues?

personal income taxes and social security taxes

receipts come from...

personal income taxes, social security taxes, corporate income taxes and indirect taxes. personal income taxes are LARGEST source of receipts

the federal govt's budget balance equals...

receipts minus outlays

we would expect the tax multiplier to be _________________ in absolute value than purchases multiplier.

smaller

the government debt is best measured as the...

sum of past budget deficits minus the sum of past budget surpluses

__________________ maintains that tax policy can either create or destroy incentives to work, save and invest.

supply-side theory

what 2 items in the government budget change automatically in response to the state of the economy?

tax revenues, needs-tested spending

supply-side economics emphasizes the role that ____________________ play in the supply of output in the economy.

taxes

cyclical surplus or deficit

that actual surplus or deficit minus the structural surplus or deficit; in recessions and expansions; occurs purely because . real GDP does not equal potential GDP

many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to...

the presence of time lags

fiscal imbalance

the present value of the governments commitments to pay benefits minus the present value of its tax revenues

Laffer Curve

the relationship between the tax rate and the amount of tax revenue collected

at the tax rate T*

the tax revenue is maximized

government debt

the total amount that the government has borrowed; sum of past deficits minus past surpluses

fiscal stimulus

the use of fiscal policy to increase production and employment; can be automatic or discretionary

fiscal policy

the use of the federal budget to achieve macroeconomic objectives, such as full employment, sustained economic growth and price level stability

what happens when government spending is greater than government revenues?

there is borrowing by the government and the government debt rises

many economists believe that increases in government debt are not necessarily problematic if the funds are used...

to build infrastructure

if outlays exceed receipts...

to govt has a budget deficit

supply-side economists point to the Laffer curve as evidence that higher taxes...

can lead to overall government revenues

the decline in private expenditures that results from an increase in government borrowing is known as...

crowding out

in 2008, spending on social security, medicare and medicaid was less than 10% of the GDP. by 2030 this amount is expected to be around 17% of GDP. one government option to solve this problem is to...

decrease benefits

budget deficits automatically _______________________ during recessions and _____________________ during expansions.

increase, decrease

which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

increasing income tax rates

the structural budget or deficit...

is measured as if the economy were at full employment

who makes fiscal policy?

the President and Congress

federal budget

the annual statement of the federal government's outlays and tax revenues; has two purposes: to finance federal government programs and activities and to achieve macroeconomic objectives

structural surplus or deficit

the budget balance that would occur if the economy were at full employment and real GDP were equal to potential GDP

generational imbalance

the division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits

tax wedge

the gap created between the before-tax and after-tax wage rates

if receipts equal outlays...

the govt has a balanced budget

if receipts exceed outlays...

the govt has a budget surplus

the largest and fastest growing category of federal expenditures is...

transfer payments

outlays are...

transfer payments, expenditure on goods and services and debt interest; transfer payments are the LARGEST item of outlays

congress attempted to grant the president a line-item veto in 1996 but the supremes court declared this unconstitutional in 1998

true

congress debates and amends the president's budget proposals and enacts a budgets before the start of the fiscal year on october 1

true

the president proposes a budget to congress each february

true