ECON - Fiscal Policy Smartbook

Which of the following are the tools of fiscal policy? Taxation Open Market Operations Interest Rate Changes Government Purchases 1 and 2 1 and 4 2 and 3 3 and 4

1 and 4

Which of the following are the tools of fiscal policy? Taxation Open Market Operations Interest Rate Changes Government Purchases 1 and 4 2 and 3 1 and 2 3 and 4

1 and 4

Mathematically, the expenditures multiplier equals: 1/(MPC - 1). 1/(MPC + 1). 1/(1 + MPC). 1/(1 - MPC).

1/(1 - MPC).

With an MPC of 0.6, the expenditures multiplier will equal ______ .

2.5

What is the effect of a successful expansionary fiscal policy on price level and output? Both decrease. Price decreases and output increases. Price increases and output decreases. Both increase.

Both increase.

What is the effect of a successful expansionary fiscal policy on price level and output? Price decreases and output increases. Both decrease. Price increases and output decreases. Both increase.

Both increase.

What is the effect of a successful expansionary fiscal policy on price level and output? Price increases and output decreases. Price decreases and output increases Both increase. Both decrease.

Both increase.

Which of the following best describes fiscal policy? The actions taken by a country's central bank to expand the money supply and lower interest rates The short-term fluctuations experienced in the economy due to changes in levels of economic activity Changes in government purchases and/or taxes designed to achieve full employment and low inflation The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP

Changes in government purchases and/or taxes designed to achieve full employment and low inflation

Which is a frequently used tool of fiscal policy? Changes in the inflation rate. Changes in government purchases. Changes in corporate bond purchases. Changes in the interest rate.

Changes in government purchases.

Real GDP expenditures is given by: (Consumption (C) + Gross Investment (I)) - (Government Purchases (G) + Net Exports (NX)). Business cycles (B) + Gross Investment (I) + Fiscal Policy (F) + Net Exports (NX). Business cycles (B) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX). Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

Real GDP expenditures is given by: Business cycles (B) + Gross Investment (I) + Fiscal Policy (F) + Net Exports (NX). Business cycles (B) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX). (Consumption (C) + Gross Investment (I)) - (Government Purchases (G) + Net Exports (NX)). Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

Real GDP expenditures is given by: Business cycles (B) + Gross Investment (I) + Fiscal Policy (F) + Net Exports (NX). Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX). (Consumption (C) + Gross Investment (I)) - (Government Purchases (G) + Net Exports (NX)). Business cycles (B) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX).

This policy involves involves decreasing government purchases and/or increasing taxes. Contractionary monetary policy Expansionary monetary policy Expansionary fiscal policy Contractionary fiscal policy

Contractionary fiscal policy

This policy involves involves decreasing government purchases and/or increasing taxes. Expansionary fiscal policy Contractionary fiscal policy Contractionary monetary policy Expansionary monetary policy

Contractionary fiscal policy

This policy involves increasing government purchases and/or decreasing taxes. Contractionary fiscal policy Expansionary monetary policy Contractionary monetary policy Expansionary fiscal policy

Expansionary fiscal policy

How does the infrastructure plan (IP) (proposed by former-president Donald Trump) differ from the American Recovery and Reinvestment Act (ARRA) (created by former-president Barack Obama)? The ARRA is a stabilization policy. The IP is a stabilization policy. The IP is a contractionary fiscal policy. The ARRA is not a fiscal policy.

The ARRA is a stabilization policy.

What group was tasked with advising the president on the level of fiscal policy during the Great Recession? The White House Council of Economic Advisors The Federal Reserve Board of Governors House of Representatives and the Senate The U.S. Department of the Treasury

The White House Council of Economic Advisors

Which of the following describes the short-term fluctuations experienced in the economy due to changes in levels of economic activity? The multiplier effect The business cycle Fiscal policy Monetary policy

The business cycle

A decline in real output for at least two consecutive quarters is called a multiplier a recession an expansion fiscal period

a recession

A decline in real output for at least two consecutive quarters is called: fiscal period. an expansion. a recession. a multiplier.

a recession.

The multiplier effect is/are the: changes in government purchases and/or taxes designed to achieve full employment and low inflation. concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP. actions taken by a country's central bank to expand the money supply and lower interest rates. short-term fluctuations experienced in the economy due to changes in levels of economic activity.

concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP.

The path to recovery using fiscal policy involves a jump start of decreased government spending followed by multiple rounds of decreased _________ spending as the economy recovers and incomes rise.

consumer

The path to recovery using fiscal policy involves a jump start of increased government spending followed by multiple rounds of increased ______ spending as the economy recovers and incomes rise.

consumer

Price level and output both decrease from a successful ___________ fiscal policy. cyclical expansionary financial contractionary

contractionary

Price level and output both decrease from a successful ___________ fiscal policy. expansionary financial cyclical contractionary

contractionary

The application of fiscal policy to decrease aggregate demand is called _____ fiscal policy.

contractionary

The application of fiscal policy to decrease aggregate demand is called _______ fiscal policy.

contractionary

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $100 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.80, government purchases would need to: increase by $20 billion. decrease by $50 billion. increase by $50 billion. decrease by $20 billion.

decrease by $20 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $100 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.75, government purchases would need to: decrease by $50 billion. increase by $50 billion. decrease by $25 billion. increase by $25 billion.

decrease by $25 billion.

Suppose that an economy is in long-run equilibrium at a price level of 100 and a full-employment real GDP of $520 billion. A recession occurs resulting from a $120 billion decrease in aggregate demand. In order to restore the economy to full employment given an MPC of 0.75, taxes would need to: increase by $50 billion. decrease by $40 billion. decrease by $50 billion. increase by $40 billion.

decrease by $40 billion.

When government spending decreases, AD: is vertical. does not change. increases. decreases.

decreases

When taxes increase, AD: is vertical. decreases. does not change. increases.

decreases

When government spending decreases, AD: increases. is vertical. does not change. decreases.

decreases.

When government spending increases, AD: does not change. increases. decreases. is vertical.

decreases.

When taxes increase, AD: does not change. curve becomes vertical. increases. decreases.

decreases.

In the short run, in order to stimulate aggregate ______ and avoid falling output and prices, the government could reduce taxes.

demand

Income minus taxes gives us the value for _____ income.

disposable

Income minus taxes gives us the value for ______ income.

disposable

Income minus taxes gives us the value for ________ income. disposable tax-free fiscal extra

disposable

Income minus taxes gives us the value for ________ income. tax-free fiscal disposable extra

disposable

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called full _____ GDP

employment

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called full ______ GDP. (Use one word for the blank.)

employment

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called full _______ GDP.

employment

The application of fiscal policy to increase aggregate demand is called ______ fiscal policy.

expansionary

The application of fiscal policy to increase aggregate demand is called _______ fiscal policy.

expansionary

The American Recovery and Reinvestment Act is a(n) __________ fiscal policy designed to ________ the economy. contractionary; expand contractionary; stabilize expansionary; slow expansionary; stabilize

expansionary; stabilize

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX) characterizes real GDP _____ .

expenditures

Net exports equals: (exports divided by imports) times 100. exports minus imports. exports times imports. exports divided by imports.

exports minus imports.

Net exports equals: exports divided by imports. (exports divided by imports) times 100. exports times imports. exports minus imports.

exports minus imports.

Net exports equals: exports divided by imports. exports times imports. exports minus imports. (exports divided by imports) times 100.

exports minus imports.

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called _____ policy.

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called _____ policy. (Remember enter only one word in the blank.)

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called ______ policy.

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called _______ policy:

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called _________ policy.

fiscal

Changes in government spending and changes in taxes are considered the primary tools of _____ policy.

fiscal

Changes in government spending and changes in taxes are considered the primary tools of ______ policy. (Enter one word for the blank.)

fiscal

Price level and output both decrease from a successful contractionary _____ policy.

fiscal

Price level and output both decrease from a successful contractionary ______ policy.

fiscal

Price level and output both increase from a successful expansionary ______ policy.

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called: inflation policy. financial policy. fiscal policy. monetary policy.

fiscal policy.

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: expansionary GDP. full output. full-employment GDP. the natural rate of GDP.

full-employment GDP.

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: full output. the natural rate of GDP. full-employment GDP. expansionary GDP.

full-employment GDP.

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: full-employment GDP. full output. the natural rate of GDP. expansionary GDP.

full-employment GDP.

The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: the natural rate of GDP. full output. full-employment GDP. expansionary GDP.

full-employment GDP.

The path to recovery using fiscal policy involves a jump start of decreased _____ spending followed by multiple rounds of decreased consumer spending as the economy recovers and incomes rise.

government

One of the most frequently used tools of fiscal policy is changing: the expected price level. interest rates. import duties. government purchases.

government purchases.

If the economy is experiencing a recession, the goal of fiscal policy will be to: reduce short-run aggregate supply. increase long-run aggregate supply. increase aggregate demand. reduce aggregate demand.

increase aggregate demand.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. A recession occurs resulting from a $100 billion decrease in aggregate demand. In order to restore the economy to full employment given a MPC of 0.75, government purchases would need to: increase by $25 billion. decrease by $50 billion. increase by $50 billion. decrease by $25 billion.

increase by $25 billion.

The path to recovery using expansionary fiscal policy involves: multiple rounds of increased consumer spending. decreased government spending. increased government spending. multiple rounds of decreased consumer spending.

increased government spending. multiple rounds of increased consumer spending.

When government spending increases, AD: does not change. is vertical. increases. decreases. decreases

increases

The condition Y = Yfull employment refers to _____ _____ equilibrium.

long run

The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called the ______ effect.

multiplier

The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called the _______ effect.

multiplier

Exports minus imports gives us _____ exports.

net

Exports minus imports gives us ______ exports.

net

Exports minus imports gives us _______ exports.

net

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX) characterizes: the business cycle. the current account. real GDP expenditures. the capital account.

real GDP expenditures.

Consumption (C) + Gross Investment (I) + Government Purchases (G) + Net Exports (NX) characterizes: the current account. the capital account. real GDP expenditures. the business cycle.

real GDP expenditures.

A decline in real output for at least two consecutive quarters is called a(n) ______ .

recession

A decline in real output for at least two consecutive quarters is called a(n) _______ .

recession

When an economy is producing above full employment, the goal of fiscal policy will be to: increase long-run aggregate supply. reduce short-run aggregate supply. increase aggregate demand. reduce aggregate demand.

reduce aggregate demand.

The condition AD = AS refers to ____ ____equilibrium.

short run

The condition AD = AS refers to _____ _______ equilibrium.

short run

Fiscal policy is: the actions taken by a country's central bank to expand the money supply and lower interest rates. the short-term fluctuations experienced in the economy due to changes in levels of economic activity. the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP. the changes in government purchases and/or taxes designed to achieve full employment and low inflation.

the changes in government purchases and/or taxes designed to achieve full employment and low inflation.

Fiscal policy is: the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP. the short-term fluctuations experienced in the economy due to changes in levels of economic activity. the actions taken by a country's central bank to expand the money supply and lower interest rates. the changes in government purchases and/or taxes designed to achieve full employment and low inflation.

the changes in government purchases and/or taxes designed to achieve full employment and low inflation.

The multiplier effect is/are: the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP. the actions taken by a country's central bank to expand the money supply and lower interest rates. the changes in government purchases and/or taxes designed to achieve full employment and low inflation. the short-term fluctuations experienced in the economy due to changes in levels of economic activity.

the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP.

The multiplier effect is: the changes in government purchases and/or taxes designed to achieve full employment and low inflation. the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP. the short-term fluctuations experienced in the economy due to changes in levels of economic activity. the actions taken by a country's central bank to expand the money supply and lower interest rates.

the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP.

Full-employment GDP refers to: the short-term fluctuations experienced in the economy due to changes in levels of economic activity. the level of real GDP produced in an economy when it is operating at the natural rate of unemployment. a phase of the business cycle characterized by increasing real GDP income and employment. a decline in real output for at least two consecutive quarters.

the level of real GDP produced in an economy when it is operating at the natural rate of unemployment.

The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called: fiscal policy. a recession. the business cycle. the multiplier effect.

the multiplier effect.

The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called: fiscal policy. the business cycle. a recession. the multiplier effect.

the multiplier effect.

The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called: the business cycle. the multiplier effect. a recession. fiscal policy.

the multiplier effect.

The business cycle is: the changes in government purchases and/or taxes designed to achieve full employment and low inflation. the short-term fluctuations experienced in the economy due to changes in levels of economic activity. the actions taken by a country's central bank to expand the money supply and lower interest rates. the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP.

the short-term fluctuations experienced in the economy due to changes in levels of economic activity.