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27 Cards in this Set
- Front
- Back
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Fiscal policy involves? |
Manipulating the levels of government spending and taxation |
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According to Keynes , the appropriate fiscal policy for a period of unemployment would involve |
Increasing government spending |
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Which of the following policies would Keynes supportduring a period of inflation? |
Increasing taxes |
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If the economy were experiencing high unemployment, which of the following would a Keynesian favor? |
An increase in government spending for interstate highways |
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If rapid economic growth resulted in substantial inflation, which of the following policies would be appropriate, according to Keynesian model? |
An increase in personal tax rates |
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According to the Keynesian model, the federal government |
Should incur surpluses is during periods of inflation and deficits during periods of unemployment or recessions |
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Deficit spending exists when |
Government spending exceeds government revenue |
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If the economy were in the midst of a severe recession, the Keynesian model would support a policy decision to |
Deliberately incur a deficit in the federal budget |
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A decision by policymakers to alter taxes in order to influence the level of economic activity is an example of |
Discretionary fiscal policy |
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Built-in stabilizers are also known as |
Automatic fiscal policy |
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According to the Keynesian and model, an attempt to balance the budget during a period of unemployment |
Would tend to intensify the unemployment problem |
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When an economic expansion has resulted in substantial inflationary pressures, the proper Keynesian fiscal policy would be to |
Reduce the size of the government's budget deficit |
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Which one of the choices below best describes an expansionary fiscal policy? |
Government spending increases, taxes decrease |
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Which one of the choices below best describes contractionary fiscal policy? |
Government spending decreases, taxes increase |
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What will happen to prices in GDP, when the government conducts an expansionary fiscal policy? |
Prices increase and GDP increases |
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What will happen to prices and GDP when the government conducts a contractionary fiscal policy? |
Prices decrease in GDP decreases |
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What will happen to prices and GDP when the government runs a budget deficit from a starting point of a balance budget? |
Prices increase and GDP increases |
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What will happen to prices and GDP, when the government runs a budget surplus from the starting point of a balanced budget? |
Prices decrease and GDP decreases |
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In a period of substantial recession, which of the following policies with a Keynesian and support? |
An increase in government spending |
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In a period of substantial inflation, increasing government spending would |
Make the inflationary problem worse |
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If the federal government spends more than it collects in tax revenue |
It will incur a budget deficit, and the public debt will increase |
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Which of the following is a false statement about built in stabilizers |
They can stop a severe inflation that is well underway |
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What is the theory of liquidity preference? |
Keynes theory that the interest rate adjust to bring money supply and money demand into balance |
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What is fiscal policy? |
The setting of the level of government spending and taxation by government policymakers |
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What is the multiplier effect? |
The additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending |
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Example of multiplier effect |
When each dollar spent by the government can raise the aggregate demand for goods and services by more than a dollar, government purchases are said to have a multiplier effect on aggregate demand |
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What are automatic stabilizers? |
Changes in fiscal policy that stimulate aggregate demand when the economy goes into recession without policymakers having to take any deliberate action |
