When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 38CTQ: Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending...

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Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
Which of the following would be classed as an expansionary fiscal policy? O A. An increase in the money supply Ов. A reduction in the number of goods exempted from VAT An increase in government taxation OD. An increase in government expenditure
Which of the following is NOT a tool of fiscal policy. O taxes O government spending Onterest rates none of the above Question 2 Assume the economy is in a deep recession. The appropriate fiscal policy response would be to: raise taxes and raise govemment expenditures cut taxes and cut govermment expenditures raise taxes and cut government expenditures O cut taxes and increase government expenditures D Question 3 Crowding out refers to the fact that: Tax cuts will cause inflation O Tax cuts may result in higher interest rates which will "crowd out" business investment spending O increased government spending will crowd out spending on imports none of the above
What are the government’s fiscal policy options for ending severe demand-pull inflation? Which ofthese fiscal options do you think might be favored by a person who wants to preserve the size ofgovernment? A person who thinks the public sector is too large? How does the “ratchet effect”affect anti-inflationary fiscal policy?
Which of the following statementsabout how fiscal policy should mostappropriately be used in a crisis iscorrect? a. If fiscal policy is usedappropriately, a fiscal deficitshould appear duringrecessionary gaps and asurplus during inflationary gaps b. Fiscalpolicy should be used at anyand all points of the cycle toaccelerate growth c. None of these statements iscorrect d. If fiscal policy is usedappropriately, a fiscal surplusshould appear duringrecessionary gaps and a fiscaldeficit during inflationarygaps
The graph below shows real GDP levels over time. Answer the following questions based on this graph. Real GDP Business Cycle A Time a. At time T, what is the economy experiencing? O an economic expansion O full-employment output O an economic contraction b. In order to smooth out the business cycle, what type of fiscal policy should the government undertake? O expansionary fiscal policy O contractionary fiscal policy c. What type of actions might the government take? O a decrease in taxes and an increase in government purchases O an increase in taxes and a decrease in government purchases O a decrease in both taxes and government purchases. O an increase in both taxes and government purchases
Question 4 functions as an automatic fiscal stabilizer because it increases when the economy is in a recession and decreases when the economy is in a recovery or boom. O Real GDP Nominal GDP O Unemployment insurance O Inflation
Which of the following is not a predicted outcome of implementing automatic fiscal policy? О а. Reduces the size of the multiplier O b. Helps prevent inflation due to inflationary gaps O C. Moderates the business cycle O d. Decreases the deficit O e. Reduces the effects of economic shocks
a. What is the role of aggregate demand in eliminatingthe GDP gap? How does the slope of the AS curveaffectthe fiscal policyactions necessary to eliminatethe GDP gap?b. Define and give three examples of automaticstabilizers.c. How can a larger government fiscal deficit cause alarger international trade deficit?
When the economy is in a recession, the government can use expansionary iscal policy to stimulate and encourage économic growth. Which of the following scenarios represent expansionary fiscal policies from both a supply perspective and a demand perspective? Choose one or more: OA The Federal Reserve increases the money supply and lowers the interest rate while the government simultaneously reduces future taxes. OB. The government lowers tax rates and issues a partial refund of taxes that have already been paid. OC The government raises tax rates and reduces payments of unemployment benefits. OD The government lowers tax rates and undertakes a replacement.of old bridges and roads. Suppose that, during a recession, the government borrows money to provide free wireless Internet access in urban areas. Whichof the following statements are correct? Choose one or more: RA This policy will likely be accompanied by an impact lag as the policy takes time to make its way to the people. O B. The…
The existence of lags in designing and implementing fiscal policy helps illustrate some of the limitations of fiscal policy aimed at easing the burdens of a recession. Which of the following statements best describes a situation when fiscal policy is more appropriate? O The Implementation lag is shorter than the recognition and legislative lags. O Demand-pull Inflation is expected to occur as the economy begins to self-correct. O To stimulate an economy that is in a severe recession or one that is slow to correct. O Fiscal policy favors tax cuts Instead of increased government purchases since this removes the legislative lag.