Econ 105 - Chapter 13 (Fiscal Policy, Deficits, An
Econ 105 - Chapter 13 (Fiscal Policy, Deficits, an
Exam (elaborations)
Econ 105 - Chapter 13 (Fiscal Policy, Deficits, and Debt) || A Verified A+ Pass.
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Econ 105 - Chapter 13 (Fiscal Policy, Deficits, an
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Econ 105 - Chapter 13 (Fiscal Policy, Deficits, An
Which of the following problems of timing may arise in connection with fiscal policy correct answers Operational lags; administrative lags, recognition lags
What provides the information needed to assess discretionary policy and determine whether it is expansionary, contractionary, or neutral? c...
Econ 105 - Chapter 13 (Fiscal Policy, Deficits, and Debt) || A
Verified A+ Pass.
Which of the following problems of timing may arise in connection with fiscal policy correct
answers Operational lags; administrative lags, recognition lags
What provides the information needed to assess discretionary policy and determine whether it is
expansionary, contractionary, or neutral? correct answers Cyclically adjusted budgets
The crowding-out effect is a potential flaw or result of expansionary ___ policy. correct answers
fiscal
List in order the steps for government to follow in order to correct an inflationary gap without
throwing it into a recessionary gap? correct answers 1. Take into account the size of the
inflationary GDP gap
2. Know that the price level is fixed and the aggregate supply curve is horizontal so the
multiplier is in full effect
3. Calculate the effect of the multiplier
4. After applying the multiplier, initiate a change in government spending that accounts for the
entire inflationary gap
When aggregate demand increases, the price level rises, But when aggregate demand decreases,
the price level tends to be inflexible. What does this describe? correct answers The ratchet effect
The manipulation of taxes and federal spending in order to stimulate the economy or reduce
inflation is known as ___ policy. correct answers fiscal
Discretionary fiscal policy consists of deliberate changes in government spending and taxation
designed to do which of the following? correct answers Control inflation; achieve full
employment; encourage economic growth
When there is a ratchet effect, what happens to the price level when the aggregate demand (AD)
declines? correct answers The price level remains the same
An economy's ___ output is also known as full-employment output. correct answers potential
Which of the following are tools of fiscal policy to positively stimulate the economy? correct
answers increases in government spending; tax reductions
Increases in which of the following will always accompany a negative GDP gap? correct answers
Unemployment
The U.S. ____ debt is the total accumulation of the deficits (minus the surpluses) the federal
government has incurred through time. correct answers public
, The total amount of money owed by the United States Treasury to holders of US securities is the
total: correct answers public debt
Which of the following demonstrate how the government can prevent a recessionary gap from
occurring when it currently is in an inflationary gap? correct answers take into account the size
of the inflationary GDP gap; remember that the price level is fixed and the aggregate supply
curve is horizontal; recall that the multiplier is in full effect; calculate an initial change in
government spending times the multiplier
Built-in stability constitutes ___ or "passive" or "automatic" budgetary policy. correct answers
nondiscretionary
Government spending is decreased by %5 billion and the resulting decline of aggregate demand
is $20 billion. This is die to: correct answers the multiplier
A declining ___ leads to a tax receipt decline and moves the government's budget from surplus
toward deficit. correct answers GDP
Which of the following are used to describe policy changes that occur without congressional
action? correct answers passive, nondiscretionary; automatic
The government may decrease government spending or increase taxes in order to eliminate
a(n)___. correct answers inflationary GDP gap
A booming economy leads to high ___ demand because equipment wears out quickly and needs
to be replaced and firms will be adding capacity. correct answers investment
Which of the following are the main reasons that deficits have emerged? correct answers fiscal
policy; war financing, recessions
What is the result of an increase in aggregate demand that occurs along the short run aggregate
supply curve where the price level does not rise? correct answers real output rises by the full
extent of the multiplier
Tax revenues automatically ___ as GDP rises during prosperity. correct answers increase
Other things equal, an increase in government spending will have what effect on an economy's
aggregate demand curve? correct answers cause it to shift out rightward
Historically, which of the following are reasons that a large US public debt might not threaten to
bankrupt the Federal government? correct answers refinancing, taxation
The ___ lag is the time between the beginning of a recession or inflation and the certain
awareness that it is actually happening. correct answers recognition
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