Test 3 Macro ch13
If the MPC in the economy is .75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.(true/false)
True
A contractionary fiscal policy shifts the aggregate demand curve leftward.(true/false)
True
How is the public debt calculated?
By cumulating the annual difference between tax revenues and government spending over the years
Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.(true/false)
True
Which of the following represents the most expansionary fiscal policy?
A $10 billion increase in government spending.
Which of the following fiscal policy changes would be the most contractionary?
A $10 billion increase in taxes and a $30 billion cut in government spending
Which of the following fiscal policy changes would be the most expansionary?
A $40 billion increase in government spending
The public debt is the:
Accumulation of all past deficits minus all past surpluses
Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions.(true/false)
True
As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system:
Serves as an automatic stabilizer for the economy
Fiscal policy is enacted through changes in:
Taxation and government spending
If the government wishes to increase the level of real GDP, it might reduce:
Taxes
Which of the following serves as an automatic stabilizer in the economy?
The progressive income tax
Due to automatic stabilizers, when the nation's total income rises, government transfer spending:
Decreases and tax revenues increase
A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.(true/false)
False
Demand-pull inflation can be restrained by increasing government spending and reducing taxes.(true/false)
False
The goal of expansionary fiscal policy is to rein in inflation.(true/false)
False
The following are important problems associated with the public debt, except:
Government borrowing to finance the debt may lead to too much private investment
A budget surplus means that:
Government revenues are greater than expenditures in a given year
Crowding out is a decrease in private investment caused by:
Increased borrowing by the government
The crowding-out effect suggests that:
Increases in government spending may reduce private investment
The goal of expansionary fiscal policy is to increase:
Real GDP
If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by:
increasing government spending by $4 billion.
Discretionary fiscal policy refers to:
intentional changes in taxes and government expenditures made by Congress to stabilize the economy.
A tax reduction of a specific amount will be more expansionary the:
larger is the economy's MPC.
A contractionary fiscal policy is shown as a:
leftward shift in the economy's aggregate demand curve.
A major advantage of the built-in or automatic stabilizers is that they:
require no legislative action by Congress to be made effective.
An expansionary fiscal policy is shown as a:
rightward shift in the economy's aggregate demand curve.
A specific reduction in government spending will dampen demand-pull inflation by a greater amount the:
smaller is the economy's MPS.