Chapter 16 Quiz – Flashcards
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Fiscal Policy Refers To Changes In
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Federal taxes and purchases that are intended to achieve macroeconomic policy objectives
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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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Which of the following is an objective of fiscal policy?
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High rates of economic growth
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Which of the following would not be considered an automatic stabilizer?
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Legislation increasing funding for job retraining passed during a recession
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The largest and fastest - growing category of federal government expenditures is
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Transfer Payments
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Government transfer payments include which of the following?
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Social Security and Medicare Programs
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Congress and the president carry out fiscal policy through changes in
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Government purchases and taxes
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An increase in government purchases will increase aggregate demand because
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Government expenditures are a component of aggregate demand.
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Expansionary fiscal policy involves
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Increasing government purchases or decreasing taxes.
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An increase in individual income taxes ______ disposable income, which ______ consumption spending.
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Decreases; decreases
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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
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Government Purchases
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To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the
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Budget deficit or surplus as a percentage of GDP
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For the federal deficit to be lowered,
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The federal government's expenditures must be lower than its tax revenue.
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A recession tends to cause the federal budget deficit to _______ because tax revenues _______ and government spending on transfer payments __________.
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Increase; fall; rise
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The federal government debt equals
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The total value of U.S Treasury Bonds Outstanding
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Suppose the economy is in 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 diagram to the right, this would be depicted as a movement from
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A to B.
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The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of
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Automatic Stabilizers
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Automatic stabilizers refer to
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Government spending and taxes that automatically increase or decrease along with the business cycle.
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Refer to the diagram to the right. An increase in taxes would be depicted as a movement from _____, using the static AD - AS model.
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B to A
