ECON 2301 FINAL Chapter 16
When tax revenues equal government outays, the situation is referred to as
a balanced budget
the federal budget is defined as
an annual statement of expenditures and tax revenues of the U.S government
An increase in Medicaid expenditure brought about by a flu epidemic
automatic fiscal policy because no action of Congress was necessary for this increase to occur.
an increase in unemployment benefits paid during a recession
automatic fiscal policy because no action of Congress was necessary for this increase to occur.
if the United States for the year 2017, the federal government had a __________________ so the national debt was __________________.
budget deficit ; increasing
the use of the federal budget to achieve macroeconomics objectives of full employment and sustainable economic growth is
called fiscal policy
Government expenditure ____________________ change potential GDP and taxes __________________ change potential GDP.
can; can
When government outlays exceed tax revenues, the situation is called as budget
deficit
the government collects tax revenues of $100 million and has $105 million in outlays. The budget balances is a
deficit of $5 million
a cut in farm subsidies
discretionary fiscal policy because an act of congress was required.
an increase in expenditure on homeland security
discretionary fiscal policy because the spending must be approved by an act of Congress
When comparing a $100 billion increase in government expenditure to a $100 billion decrease in tax revenue, the effect of the increase in government expenditure on aggregate demand is
greater than the effect of the tax decrease
When the government's expenditures exceed its tax revenues, the budget
has a deficit and the national debt is increasing
When tax revenues exceed the government's outlays, the budget
has a surplus and the national debt is decreasing
Suppose the shift from AD 0 to AD 1 and from AS 0 to AS 1 is the result of fiscal policy. When of the policies below could lead to these shifts? (has a graph) i. an increase in government expenditure ii. a tax cut iii. a decrease in government expenditure iv. a tax hike
i and ii
When tax revenues minus outlays is i. positive, the government has a budget surplus ii. negative, the government had a budget deficit iii. zero, the government has a balanced budget
i, ii, and iii
transfer payments include i. social security benefits ii. medicare and medicaid benefits iii. unemployment benefits
i, ii, and iii
An increase in government expenditure can ____________________ potential GDP and an increase in taxes can _________________ potential GDP.
increase; increase
if the government expenditure on goods and services increase by $100
increases by more than $100 billion
if the government expenditures on goods and services increased by $20 billion, then aggregate demand
increases by more than $20 million
When the government's outlays equal its tax revenues, then the budget
is balanced
to eliminate this fiscal imbalance the government could
lower benefits and increase tax rates
When tax revenues _________________ outlays is negative, then the government has a budget ________________.
minus; deficit
When tax revenues ____________________ outlays is positive, then the government has a budget _______________.
minus; surplus
if the federal government has a budget surplus, then it is definitely the case that
tax revenue exceeds government outlays
The government has a budget surplus if
tax revenues are greater than outlays
If the income tax rate is 20 percent and the tax rate on consumption expenditure 15 percent, then the tax wedge is
35 percent
Does the figure above illustrate a recessionary or an inflationary gap? What do potential GDP and real GDP equal? What is an appropriate fiscal policy to restore real GDP to potential real GDP?
A recessionary gap occurs when real GDP is less than potential GDP; which is precisely what the figure illustrates. In the figure, potential GDP equals $16.5 trillion but real GDP equals only $16.0 trillion. In order to restore real GDP back to potential GDP using fiscal policy, the government could increase government expenditures on goods and services and/ or decrease taxes.
Decreased expenditures on national defense during peace time
Discretionary fiscal policy because the spending change must be approved by an act of Congress
Suppose that in an economy, investment is $400 billion, saving is $400 billion, tax revenues are $500 billion, exports are $300, and imports are $200 billion. Calculate government expenditure and the government's budget balance.
Government expenditure- $400 billion (G= S-I+T+M-X Budget Balance- $100 billion ($500billion -$400billion)