Economics
If the federal debt rises as a result of increasing government spending, the burden of the debt will necessarily be greater than the benefit.
F
The U.S. federal government has never run a surplus in the last decade.
F
Expansionary U.S. fiscal policy will tend to move funds out of the United States.
F (borrow within US from treasury bonds)
The multiplier process is virtually instantaneous.
F (takes lots of time)
The multiplier effect of a reduction in taxes is larger than the multiplier effect of an equal increase in government spending on goods and services.
F (tax is indirect)
If the economy were in an unsustainable boom, appropriate countercyclical policy would be to increase the budget deficit.
F (want to create surplus)
If tax rates are reduced, it will affect aggregate supply but not aggregate demand.
F (will affect AD plus AS)
If the U.S. government has a large current federal debt, it must be running a current year deficit.
F (with surplus may still not be enough)
The multiplier is equal to 1 divided by the marginal propensity to consume.
F 1/1-mpc
Starting at full employment, the long-run result of contractionary fiscal policy includes a lower price level and reduced real output.
F why
The crowding-out effect does not occur with a tax change.
F why
Contractionary fiscal policy will tend to reduce a federal budget surplus or increase a federal budget deficit.
F: increase federal budget deficit
An increase in taxes will increase aggregate demand.
F: increase in tax will lower money people have(decrease demand)
A budget surplus is the most common result of government fiscal policy.
F: most common is budget deficit
Starting from an initial recession equilibrium, a government tax increase would tend to reduce the severity of the recession.
F: tax increase
A lower marginal tax rate will raise after-tax earnings, improving productive incentives.
T
A person's MPC and MPS can be equal only if MPC = 0.5.
T
An increase in government purchases of goods and services will stimulate the economy by increasing aggregate demand.
T
An increase in government spending and/or a tax cut will tend to move the economy up along its short-run aggregate supply curve.
T
Contractionary fiscal policy has the potential to offset an overheated, inflationary boom.
T
Contractionary fiscal policy will tend to increase a current government budget deficit.
T
Critics of the crowding-out effect argue that an increase in government purchases (or a tax cut), particularly if the economy is in a severe recession, could improve consumer and business expectations and actually encourage private investment spending.
T
Expansionary fiscal policy has the potential to move an economy out of recession.
T
Higher marginal tax rates will lead investors to spend more scarce resources looking for tax shelters, which harms the economy as high-return but highly taxed investments give way to lower-return tax shelters.
T
If policymakers are unhappy about the present short-run equilibrium GDP, they can deliberately manipulate the level of government purchases in order to obtain a new short-run equilibrium value.
T
If public debt is created intelligently, the "burden" of the debt should be less than the benefits derived from the resources acquired as a result.
T
If the MPC were equal to two-thirds, the multiplier would be equal to 3.
T
If the economy were in recession, a fiscal policy that decreased the budget deficit would make the recession worse.
T
One of the advantages of automatic stabilizers is that they take place without the necessity for deliberations in Congress or the executive branch of the government.
T
One way the federal government can finance deficits is to print money.
T
Printing money to finance government activities is inflationary.
T
Real GDP will tend to change anytime the amount of consumption, investment, government purchases, or net exports changes.
T
Savings and money spent on imported goods will each reduce the size of the multiplier because each reduces the fraction of a given increase in income that will go to additional purchases of domestically produced consumption goods.
T
Sometimes fiscal policy designed to stabilize the economy may actually destabilize the economy.
T
Starting at a full-employment equilibrium, the gains in employment that result from expansionary fiscal policy will not be sustainable in the long run.
T
Starting at full employment, contractionary fiscal policy could cause a recession in the short run.
T
Starting from an initial recession equilibrium, expansionary fiscal policy could potentially increase employment to RGDPNR.
T
Supply-siders would encourage government to reduce individual and business taxes, deregulate, and increase spending on research and development.
T
The crowding-out effect will tend to reduce the magnitude of the effects of increases in government purchases.
T
The effect of an increase in aggregate demand depends on the position of the macroeconomic equilibrium prior to the government stimulus.
T
The government can use fiscal policy to stimulate the economy out of a recession or to try to bring inflation under control.
T
The multiplier may be written as 1/(1 - MPC) or as 1/MPS.
T
The multiplier would be smaller if the marginal propensity to consume were smaller.
T
Time lags in the legislative process are a serious problem in the implementation of fiscal policy.
T
Unemployment compensation and public assistance payments act as automatic stabilizers, stimulating aggregate demand during recessions and reducing aggregate demand during booms.
T
When tax revenues are greater than government spending, a budget surplus exists.
T
When the federal government spends more, other things being equal, it tends to increase both that year's deficit and the federal debt.
T
Supply-siders' primary focus is on stabilizing aggregate demand in the short run.
T (believe in long run)
When an initial increase in government purchases of goods and services occurs, the ultimate increase in total purchases will tend to be greater than the initial increase.
T (due to multiplier effect)
The crowding-out effect implies that expansionary fiscal policy will tend to reduce private purchases of interest-sensitive goods.
T (expanding=lower taxes + more govt money)
If greater research and development leads to new technology and knowledge, it will shift the short- and long-run aggregate supply curves to the right.
T (great tech= shift AS/AD to the right)- some economists increase in quaternary and tertiary jobs but strong tendency to decrease primary jobs
The sum total of the values of all bonds outstanding constitutes the federal debt.
T (international and national ; anyone can buy bonds)
If MPC = 0.67, the effects of a change in taxes on AD would be two-thirds the magnitude of the effects of an equal change in government spending.
T (taxes are immediately affected by mpc whereas govt spending is immediately put into the market and only later affected by mpc
Expansionary fiscal policy will tend to be partly crowded out by a reduction in net exports.
T (things more money so people buy less)
After expansionary fiscal policy legislation is signed into law, it takes time to bring about the actual fiscal stimulus desired.
T (trickle down)
The effect of a $5 billion change in government spending on AD would be greater than that of an equal change in taxes, regardless of the MPC.
T (unless mpc is 100%)
If the marginal propensity to consume is two-thirds, a $6 million increase in disposable income to certain households will lead them to increase their consumption spending by $18 million.
T 1/1-2/3
Sometimes special emergencies, such as military involvements and natural disasters, may lead governments to run deficits.
T Katrina
