Home Page Social Science Economics Macroeconomics Principles Of Economics: Macroeconomics Ch 16 Review - Flashcards

Ch 16 Review – Flashcards

Rosa Sloan

8 July 2022

question

Fiscal policy refers to

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federal taxes and purchases that are intended to achieve macroeconomics policy objectives

question

16-1. Suppose the economy is in a short0run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium. Using static AD-AS model in the figure above, this would be depicted as a movement from

answer

C to B

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If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

answer

government purchases

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If the tax multiplier is -1.5 and $200 billion tax increase is implemented, what is the change in GDP , holding everything else constant? (Assume the price level stays constant)

answer

A $300 billion decrease in GDP

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The government purchases multiplier equals change in (blank) divided by the change in (blank)

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equilibrium real GDP; government purchases

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Figure 6-4. In the graph above, the shift AD 1 to AD 2 represents the total change in aggregate demand. If government purchases increased by $50 billion, then the distance from point A to point B (blank) $50 billion

answer

would be greater than

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Refer to Figure 16-1. An increase in taxes would be depicted as a movement from (blank), using the static AD-AS model in the figure above

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B to A

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16-1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a move from (blank) using the static AD-AS mode

answer

C to B

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Tax cuts on business income (blank) aggregate

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would increase

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16-1. Suppose the economy is in the short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium. Using the static AD-AS model in the figure above, this would be depicted as a movement from

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A to B

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Tax cuts on business income increase aggregate demand by increasing

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business investment spending

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Suppose congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced. What will happen to real equilibrium GDP?

answer

Real equilibrium GDP will rise

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The multiplier effect refers to the series of

answer

induced increases in consumption spending that result from an initial increase in autonomous expenditures

question

The tax multiplier equals the change in (blank) divided by the change in (blank)

answer

equilibrium real GDP; taxes

question

An increase in government purchases will increase aggregate demand because

answer

government expenditures are a component of aggregate demand

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If real GDP exceeded potential real GDP and inflation was increasing, which of the following would be an appropriate fiscal policy

answer

an increase in taxes

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Which of the following would NOT be considered an automatic stabilizer

answer

legislation increasing funding for job retraining passed during a recession

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Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be (blank) and real GDP to be (blank)

answer

higher;higher

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Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy?

answer

increase in inflation

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Expansionary fiscal policy

answer

can be effective in the short run

question

Congress and the president carry out fiscal policy through changes in

answer

government purchases and taxes

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The aggregate demand curve will shift to the left (blank) the initial decrease in government purchases

answer

by more than

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Crowding out refers to a decline in (blank) as a result of an increase in (blank)

answer

private expenditures; government purchases

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16-1. Suppose the economy is in a recession and expasionary fiscal policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from

answer

A to B

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Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the economy back to potential GDP, Congress should

answer

lower government purchases by an amount less than $200 billion

question

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be (blank) and real GDP to be (blank)

answer

lower;lower

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Which of the following is an objective of fiscal policy

answer

high rates of economic growth

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Which of the following would be classified as fiscal policy

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The federal government cuts taxes to stimulate the economy

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Expansionary fiscal policy involves

answer

increasing government purchases or decreasing taxes

question

Fiscal policy is determined by

answer

Congress and the president

question

Which of the following is considered contractionary fiscal policy

answer

Congress increases the income tax rate

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question

Fiscal policy refers to

answer

federal taxes and purchases that are intended to achieve macroeconomics policy objectives

question

answer

C to B

question

If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in

answer

government purchases

question

If the tax multiplier is -1.5 and $200 billion tax increase is implemented, what is the change in GDP , holding everything else constant? (Assume the price level stays constant)

answer

A $300 billion decrease in GDP

question

The government purchases multiplier equals change in (blank) divided by the change in (blank)

answer

equilibrium real GDP; government purchases

question

answer

would be greater than

question

Refer to Figure 16-1. An increase in taxes would be depicted as a movement from (blank), using the static AD-AS model in the figure above

answer

B to A

question

answer

C to B

question

Tax cuts on business income (blank) aggregate

answer

would increase

question

answer

A to B

question

Tax cuts on business income increase aggregate demand by increasing

answer

business investment spending

question

Suppose congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced. What will happen to real equilibrium GDP?

answer

Real equilibrium GDP will rise

question

The multiplier effect refers to the series of

answer

induced increases in consumption spending that result from an initial increase in autonomous expenditures

question

The tax multiplier equals the change in (blank) divided by the change in (blank)

answer

equilibrium real GDP; taxes

question

An increase in government purchases will increase aggregate demand because

answer

government expenditures are a component of aggregate demand

question

If real GDP exceeded potential real GDP and inflation was increasing, which of the following would be an appropriate fiscal policy

answer

an increase in taxes

question

Which of the following would NOT be considered an automatic stabilizer

answer

legislation increasing funding for job retraining passed during a recession

question

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be (blank) and real GDP to be (blank)

answer

higher;higher

question

Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy?

answer

increase in inflation

question

Expansionary fiscal policy

answer

can be effective in the short run

question

Congress and the president carry out fiscal policy through changes in

answer

government purchases and taxes

question

The aggregate demand curve will shift to the left (blank) the initial decrease in government purchases

answer

by more than

question

Crowding out refers to a decline in (blank) as a result of an increase in (blank)

answer

private expenditures; government purchases

question

16-1. Suppose the economy is in a recession and expasionary fiscal policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from

answer

A to B

question

Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the economy back to potential GDP, Congress should

answer

lower government purchases by an amount less than $200 billion

question

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be (blank) and real GDP to be (blank)

answer

lower;lower

question

Which of the following is an objective of fiscal policy

answer

high rates of economic growth

question

Which of the following would be classified as fiscal policy

answer

The federal government cuts taxes to stimulate the economy

question

Expansionary fiscal policy involves

answer

increasing government purchases or decreasing taxes

question

Fiscal policy is determined by

answer

Congress and the president

question

Which of the following is considered contractionary fiscal policy

answer

Congress increases the income tax rate

Ch 16 Review – Flashcards

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