Macroeconomics Chapter 10 Quiz

_____ is the part of the budget that works its way through Congress each year; it includes such programs as national defense, transportation, Medicaid, and education.

Discretionary spending

Which of the following illustrates the information lag?

The economy is predicted to increase at 0.1% in July, but the numbers are revised in August to reflect an actual 2% decrease.

If a government collects $1,400 in tax revenue and spends $1,600, it has:

a deficit of $200.

The progressive income tax and transfer payments are the two main:

automatic stabilizers.

According to the crowding out effect, if the government sells bonds to finance spending, _____ can eventually fall.

consumption and investment

Contractionary fiscal policy:

decreases aggregate demand.

The _____ lag is the time required to turn fiscal policy into law and affect the economy.

implementation

Suppose the economy is in a recession. To increase demand using discretionary fiscal policy, the government can:

increase government spending or cut taxes.

Rising productivity will drive increased economic growth and raise the average standard of living, shifting _____ curve to the _____.

long-run aggregate supply; right

(Figure: Determining Fiscal Policy) Expansionary fiscal policies could:

move the economy to full employment.

The government can finance a budget deficit by:

selling assets.

When the economy is below full employment, expansionary fiscal policy:

shifts the aggregate demand curve to the right.

Increased government _________ leads to a larger increase in GDP when compared to the same reduction in ________.

spending; taxes