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Fiscal Policy, Deficits, & Debt.
Terms in this set (25)
Fiscal policy refers to
manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.
When the federal government uses taxation and spending actions to stimulate the economy, it is conducting:
fiscal policy.
If the government wishes to increase the level of real GDP, it might reduce:
Taxes
Which combination of fiscal policy would most likely be offsetting?
Increase in taxes and government spending.
Refer to the above diagram. The economy is at equilibrium at point B. What fiscal policy would increase real GDP?
Increase aggregate demand from AD2 to AD3 by decreasing taxes.
Countercyclical discretionary fiscal policy calls for:
deficits during recessions and surpluses during periods of demand-pull inflation.
When government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this is an example of:
built-in stability.
A federal budget deficit exists when:
Federal government spending exceeds tax revenues
The crowding-out effect suggests that
increases in government spending may raise the interest rate and thereby reduce private investment.
The public debt is held as:
Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.
The time that elapses between the beginning of a recession or an inflationary episode an dthe identification of the macroeconomic problem is referred to as a (n):
recognition lag.
Which of the following are contractionary fiscal policies?
Increased taxation and decreased government spending.
If the 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.
The combination of fiscal policies that would reinforce each other and be most expansionary would be a (n):
increase in government spending and a decrease in taxes.
A contractionary fiscal policy can be illustrated by a (n):
decrease in aggregate demand.
The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a
budget deficit.
Which of the following best describes the built-in stabilizers as they function in the United States?
Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
The public debt for the economy is
460 billion
Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2015)?
34 %
The public debt is the amount of money that
the federal government owes to holders of U.S. securities.
Which of the following best describes the idea of a political business cycle?
Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.
Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit
at any level of GDP below $400.
Other things equal, an increase of corporate bonds from $140 billion to $150 billion in the economy would
not change the size of the public debt.
Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. In this economy,
tax revenues vary directly with GDP, but government spending is independent of GDP.
To say that "the U.S. public debt is mostly held internally" is to say that
the bulk of the public debt is owned by U.S. citizens and institutions.
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