Fiscal Policy

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Which of these fiscal policy actions will increase real GDP in the short run?

An increase in government expenditure on goods and services

Every time the federal government runs a budget deficit, it must

Borrow

If the federal government's outlays are less than its tax revenue, there is a

Budget surplus

Which of these is an example of an automatic stabilizer?

An unemployment benefit program

Which type of fiscal policy would cause the move of the AD outward

Higher government expenditure on goods and services

Which of these would be a fiscal policy the government might use if real GDP exceeded potential GDP and the government wanted to move real GDP closer to potential GDP?

Increasing income tax rates

Which of these are the largest sources of federal government revenues?

Personal income taxes and social security taxes

The tax multiplier is __________ in absolute value than the government expenditure multiplier.

Smaller

The tax multiplier equals the effect of a change in taxes on

aggregate demand.

Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called

automatic stabilizers

Changes in tax rates impact the economy by changing

both aggregate demand and aggregate supply.

The American Recovery and Reinvestment Act of 2009 is a clear example of

discretionary fiscal policy

When the economy is in a recession, the government can

increase government expenditure on goods and services or decrease taxes in order to increase aggregate demand.

Budget deficits automatically __________ during recessions and __________ during expansions.

increase, decrease

The structural budget balance

is the budget balance that would occur if the economy were at potential real GDP.

According to supply-side theory, fiscal policymakers can combat the impact of recessions by

lowering tax rates

The largest category of federal outlays is

transfer payments

The decrease in private investment that results from an increase in the government budget deficit is known as

Crowding out


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