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