Econ final

Domestic consumers of the exported good pay

A higher price and purchase a smaller quantity of it

The world trade organization determines that dumping has occurred if

A product is exported for a lower price than it sells in a home market

fiscal stimulus is

A) expansionary fiscal policy, such as increases in government spending and tax cuts designed to reduce unemployment and increase output.

Discretionary fiscal stimulus

Alters government spending or taxes

How is an unemployment benefit program an example of automatic fiscal policy?

Because automatic stabilizers are govt spending and taxes that automatically increase or decrease depending on the phase of the business cycle. These benefits would increase during recession to keep recession's impact from being severe

A fiscal cliff does not include

Beginning of an automatic spending increase in domestic budget

How does the corporate income tax influence potential gdp and real gdp growth rate

Corporate income tax decreases level of potential gdp and slows real gdp growth rate

Everything else remaining the same, an increase in government spending will

Decrease investment

A tax hike on labor income will

Decrease potential gdp and weaken incentive to work

The federal government passing legislation that extends transfer payments is an example of

Discretionary fiscal policy

When a country opens up to free international trade

Domestic producers of the exported good receive a higher price and sell a greater quantity of it

The present value of a government's commitments to pay benefits minus the present value of tax revenues

Fiscal imbalance

Generational imbalance is the division of

Fiscal imbalance between the current and future generations assuming they will enjoy existing levels of taxes and benefits

The tax wedge is

Gap created by a tax between what buyers pay and what a seller receives

An increase in infrastructure spending will

Increase employment and decrease unemployment

Which fiscal policy might a government try if the economy is operating at too high a level of output?

Increase incone tax rates

An increase in infrastructure spending

Increases employment and decreases unemployment

The fiscal cliff

Increases the labor market tax wedge and decrease level of employment

Why would most economists not be in favor of a balanced federal budget mandate?

It would tie the hands of government and not allow for automatic and discretionary fiscal policy action to move the economy out of the recession

Discretionary fiscal stimulus is

Legislation involved and increases government spending and tax cuts in order to increase aggregate demand

Receipts come from 4 sources

Personal income taxes, social security taxes, corporate income taxes, and indirect taxes

Fiscal imbalances is

Present value of the government's commitments to pay benefits minus the present value of its tax revenues

In the short run, an increase in government expenditure will

Shift the aggregate demand curve rightward and increase real gdp

Tarifff generates greater revenues, the

Steeper is demand and the steeper is supply

Cyclical surplus or deficit occurs because

Tax revenues and outlays are not at their full employment levels

The government budget tends to decline during the expansion phase of a business cycle because

Tax revenues increase and govt transfer payments decrease

The sugar quota in the U.S creates winners and losers. The winners are

U.S sugar producers and losers are consumers

A tax wedge is the difference between

What a buyer pays and what a seller receives

cyclical deficit

a federal budget deficit that is caused by a recession and the consequent decline in tax revenues

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

automatic stabilizers

If taxes exactly equaled government expenditures the

budget deficit would be zero

Fiscal policy

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

Structural deficit

federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy

The Laffer curve illustrates that, in some circumstances, the government can reduce a tax on a good and increase the

government's tax revenue

Automatic fiscal stimulus

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

Fiscal imbalance is the​ ______ value of the​ government's commitments to pay benefits minus the​ ______ value of its tax revenues.

present, present

Income taxes in the United States are part of automatic fiscal policy because

tax revenues increase when income increases, thus offsetting some of the increase in aggregate demand

Supply side theory

the belief that lower taxes and fewer regulations will stimulate the economy and can either create or destroy incentives to work

Government expenditure multiplier

the effect of a change in government expenditure on goods and services on equilibrium real GDP

Tax Multiplier

the ratio of change in the equilibrium level of output to a change in taxes