An expansionary fiscal policy shifts the aggregate demand curve Select one: a. to the right and is used to close an inflationary gap. b. to the right and is used to close a recessionary gap. c. to the left and is used to close an inflationary gap. d. to the left and is used to close a recessionary gap.

An expansionary fiscal policy shifts the aggregate demand curve Select one: a. to the right and is used to close an inflationary gap. b. to the right and is used to close a recessionary gap. c. to the left and is used to close an inflationary gap. d. to the left and is used to close a recessionary gap.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 4P

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Identify each scenario as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. a. An increase in the money supply is b. A decrease in taxes is fiscal policy. not an example of fiscal policy. a contractionary an expansionary d. An increase in tax rates is c. A decrease in the unemployment rate is fiscal policy. fiscal policy. f. A decrease in the money supply is e. A decrease in government spending is fiscal policy. fiscal policy. h. An increase in corporate bonds purchased is g. A decrease in transfer payments is fiscal policy. fiscal policy. i. An increase in government spending is fiscal policy.
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QUESTION 32 The government can use in the form of O a contractionary fiscal policy, a decrease in government spending Ob. an expansionary fiscal policy, an increase in government spending C. an expansionary fiscal policy, an increase in corporate taxes da contractionary fiscal policy, a reduction in taxes to decrease the level of aggregate demand in the economy.
The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it a. reduces investment and thereby increases consumer spending. b. increases the money supply and thereby reduces interest rates. c. increases income and thereby increases consumer spending. d. decreases income and thereby increases consumer spending.
Assume there is a decrease in the aggregate demand, if expansionary fiscal policy is being used, the following action could be taken a. increase consumption by raising disposable income through cuts in personal taxes or payroll taxes b. increasing government spending by raising after-tax profits through cuts in business taxes c. increase government purchases through increased Federal Government spending on final goods and services and raising grants to state and local government to increase their expenditures on final goods and services d. All of the above
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The change in aggregate demand that results from fiscal expansion changing the interest rate is called the a. multiplier effect. b. crowding-out effect. c. accelerator effect. d. Ricardian equivalence effect.
Identify one fiscal policy action that could counter the increase in investments. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates
Assume an economy that is operating above full employment. Draw a correctly labeled aggregate demand and aggregate supply graph and show each of the following: The long-run aggregate supply curve. Current price level and output levels, labeled PLe and Ye Full employment output, labeled Yf a. Identify one fiscal policy action that could resolve the problem. b. Using your graph above, show the short-run effects of the action you identified on each of the following: Aggregate demand. Explain (use the cause and effect chain you learned in the lesson) Output Price Level c. Using a correctly labeled loanable funds graph, show the effect of the policy you identified in your resolution of the problem in section a on real interest rates. d. Given the change in the real interest rate in c. What is the impact on each of the following? Investment Economic growth rate. Explain The international value of the dollar. Explain. e. Now assume instead that the government takes no…
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