Economics Chapter 16
Crowding out refers to
A decline in private expenditures as a result of an increase in government purchases
What would be considered an active fiscal policy
A tax cut is designed to stimulate spending passed during a recession
Fiscal policy is determined by
Congress and The President
what would be considered contractionary fiscal policy
Congress increases the income tax rate
One objective of fiscal policy is
High rates of economic growth.
The impact of crowding out may be the least when
In a deep recession
Expansionary fiscal policy will
Shift the aggregate demand curve to the right
One example of fiscal policy is
The federal government cuts taxes to stimulate the economy
The total value of U.S. Treasury bonds outstanding equals
The federal government debt
What is an example of discretionary fiscal policy
The tax cuts passed by Congress in 2001 to combat the recession
The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of
automatic stabilizers
The increase in the amount the government collects in taxes when the economy expands and the decrease in the amount the government collects in taxes when the economy goes into a recession is an example of
automatic stabilizers
fiscal policy refers to changes in
federal taxes and purchases that are intended to achieve macroeconomic policy objectives
If the economy is falling below potential real GDP, what would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply
government purchases
Automatic stabilizers refer to
government spending and taxes that automatically increase or decrease along with the business cycle.
Expansionary fiscal policy involves
increasing government purchases or decreasing taxes
What is an example of something that is not an automatic stabilizer
legislation increasing funding for job retraining passed during a recession
The crowding out of government spending by private spending will be greater the
more sensitive consumption, investment, and net exports are to changes in interest rates
The use of fiscal policy to stabilize the economy is limited because
the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way