When the Federal government uses taxation and spending actions to stimulate the economy it is conducting: |
Fiscal policy |
When the Federal government takes budgetary action to stimulate the economy or rein in inflation, such policy is: |
Discretionary Fiscal Policy |
When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is: |
Nondiscretionary |
Fiscal policy is enacted through changes in: |
Taxation and government spending |
The group that often initiates changes in fiscal policy is the: |
Council of Economic Advisors |
If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n): |
Expansionary fiscal policy |
If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n) |
Contractionary fiscal policy |
The set of fiscal policies that would be most contractionary would be a(n): |
Decrease in government spending and an increase in taxes |
The intent of contractionary fiscal policy is to: |
Decrease aggregate demand |
The goal of expansionary fiscal policy is to increase: |
Real GDP |
If the government wishes to increase the level of real GDP, it might reduce: |
Taxes |
If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be: |
Increased government spending or decreased taxation, or a combination of the two actions |
The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a: |
Budget deficit |
When government spending is increased, the amount of the increase in aggregate demand primarily depends on: |
The size of the multiplier |
If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the: |
Economy’s MPS is small |
Which of the following is an example of built-in stability? As real GDP decreases, income tax revenues: |
Decrease and transfer payments increase |
If government tax revenues automatically change in a countercyclical direction over the course of the business cycle, this would be called a(n): |
Built-in fiscal stabilization |
The so-called "negative taxes" are better known as: |
Transfer payments |
Due to automatic stabilizers, when income rises, government transfer spending: |
Decreases and tax revenues increase |
Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget amendment that would require the Federal government to balance its budget during a recession would be: |
Contractionary and worsen the effects of the recession |
The last year when there was a surplus in the actual U.S. Federal budget was in: |
2001 |
The American Recovery and Reinvestment Act of 2009 included mostly: |
Increases in government spending and decreases in taxes |
One timing problem with fiscal policy to counter a recession is a "recognition lag" that occurs between the: |
Start of the recession and the time it takes to recognize that the recession has started |
One timing problem with fiscal policy to counter a recession is an "operational lag" that occurs between the: |
Time fiscal action is taken and the time that the action has its effect on the economy |
One timing problem with fiscal policy to counter a recession is an "administrative lag" that occurs between the: |
Time the need for the fiscal action is recognized and the time that the action is taken |
The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n): |
Recognition lag |
The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the: |
Administrative lag |
Proponents of the notion of a "political business cycle" suggest that: |
A possible cause of economic fluctuations is due to the use of fiscal policy for political purposes |
State and local governments are limited in their ability to respond to recessions because of: |
Constitutional and other requirements to balance their budgets |
The crowding-out effect suggests that: |
Increases in government spending may reduce private investment |
The crowding-out effect arises when: |
Government borrows in the money market, thus causing an increase in interest rates |
The crowding-out effect works through interest rates to: |
Decrease the effectiveness of expansionary fiscal policy |
Econ Final 13
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