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Exam 16: Fiscal Policy

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Question 71

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A government tax rebate of $1,000 would ________ your disposable income by ________.

A) increase; less than $1,000
B) increase; $1,000
C) decrease; less than $1,000
D) decrease; $1,000

E) All of the above
F) A) and B)

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Question 72

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If Congress wanted to counteract the effects of a recession it could

A) increase tax rates.
B) increase taxes by a fixed amount.
C) increase government purchases.
D) decrease defense spending.

E) None of the above
F) A) and B)

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Question 73

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Article Summary In November 2017,the House Ways and Means Committee announced a tax reform bill which includes hundreds of changes to the tax code.Overall,the tax plan represents a move in the direction of greater neutrality and global competitiveness.Following are eight of the most important provisions in the tax bill. 1.The corporate tax rate would be reduced to 20 percent. 2.Pass-through business income would be taxed at a maximum rate of 25 percent. 3.Some disincentives to investment would be rolled back. 4.The country would move to a territorial tax system. 5.Many itemized deductions would be eliminated. 6.The estate tax would be repealed. 7.The tax treatment of interest would change. 8.Tax expenditures would be curtailed. Source: Jared Walczak and Amir El-Sibaie,"Eight Important Changes in the Tax Cuts and Jobs Act," taxfoundation.org,November 2,2017. -Refer to the Article Summary.The repeal of the estate tax would increase the posttax return to saving,causing a(n) ________ in the supply of loanable funds and a(n) ________ in investment spending.

Figure 16-1 -Refer to Figure 16-1.Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued.Using the basic AD-AS model in the figure above,this would be depicted as a movement from

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and Congress to conduct contractionary fiscal policy.Briefly explain the condition of the economy and what the president and Congress are attempting to do.

The multiplier effect refers to the series of

What is the "tax wedge"?

Economists who believe the supply-side effects of tax cuts are small essentially believe that

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by

The Trump administration hopes to expand apprenticeship programs that provide skills needed by workers.This would ________ the employment-population ratio,which would increase ________.

In preparing their estimates of the stimulus package's effect on GDP,Obama administration economists estimated a government purchases multiplier of 1.57.Economist Robert Barro argues that during wartime,the military expenditures multiplier would be ________ the administration's estimate of the government purchases multiplier,and economists Lawrence Christiano,Martin Eichenbaum,and Sergio Rebelo argued that when short-term interest rates are zero,the government purchases multiplier would be ________ the administration's estimate.

Which of the following is the largest category of federal government expenditures?

The multiplier effect is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.

If government spending and the price level increase,then

An increase in government spending increases the supply of money in our economy.

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the president and Congress to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what the president and Congress are attempting to do.

Congress and the president carry out fiscal policy through changes in

Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?