Chap 13 Econ

Front 1

fiscal policy

Back 1

the discretionary changing of government expenditures or taxes to achieve national economic goes, such as high employment with price stability

Front 2

discretionary fiscal policy is defined as

Back 2

deliberate change in taxes/ and or government spending in order to change equilibrium real gdp and employment

Front 3

if recessionary gap exists, it can be offset by ____; such policy entails______ or _____, which will cause the aggregate demand curve to shift ______; real gdp should ____ and price level should ____

Back 3

expansionary fiscal policy
increasing government expenditures
decreasing taxes
rightward
rise
rise

Front 4

supply side effects can result from fiscal policy ax changes; if marginal tax rates rise this can induce laborers to substitute _____ for ________

Back 4

leisure
income resulting from working

Front 5

if inflationary gap exists,_____ is in order, it can be eliminated if _______ or ______; this will cause the ad curve to shift ____ and real gdp to _____

Back 5

contractionary fiscal policy
government expenditures decrease
taxes increased
leftward
fall

Front 6

if the economy is already operating on its long-run aggregate supply curve, then fiscal policy actions which shift the ad curve will cause real gdp to change_____; and the price level will change ___ in the longrun relative to the short run

Back 6

temporarily
more

Front 7

if government expenditures are financed by borrowing, a federal budget _____ will result, which can cause the interest rate to ___, which in turn will cause business investment and household consumption on ____ to ____; hence fiscal policy effects will be _____

Back 7

deficit
rise
durable
fall
reduced

Front 8

if households perceive government deficit spending as an increase in their future tax liabilities, they may save ____ according to the _____; hence fiscal policy effects will be _____

Back 8

more
ricardian equivalence theorem
reduced

Front 9

to the extent that government expenditures compete with the private sector, then such expenditures will _____ business investment expenditures; hence fiscal policy effects of an increase in government spending will be _____

Back 9

discourage
reduced

Front 10

if US government deficit spending causes market interest rates to rise, businesses will want to ____ investment spending, and households desire to _____ spending on durable goods; hence the expansionary effects of an increase in government spending will be ____ by this indirect expenditure offset

Back 10

decrease
decrease
reduced

Front 11

The ____ indicates that tax revenues initially____ with higher tax rate as the tax rate is increased above a rate of 0 percent, but eventually tax revenues ___ as the tax rate is increased further

Back 11

Laffer curve
rise
fall

Front 12

if government expenditures or taxes change over the business cycle without deliberate action taken by congress, this is referred to as an ______ or built in_____;examples of automatic fiscal policy include _____ and _____; automatic fiscal policy ____ the magnitude of business cycle fluctuations

Back 12

automatic fiscal policy
stabilizers
progressive tax system
unemployment compensation
decreases

Front 13

discretionary fiscal policy is ______ to conduct because it usually takes ___ time for congress to enact such policy

Back 13

difficult
much

Front 14

if the public perceives that deficit spending creates future tax liabilities, and it people wish to leave money to their heirs, then current saving ____; hence the net effect of deficit spending on interest rates is _____

Back 14

increase
uncertain

Front 15

there are three time lags that hamper fiscal policy: ____, ____, and ____. the existence of time lags makes conducting fiscal policy _____ for policy makers

Back 15

recognition
action
effect
harder

Front 16

because of automatic stabilizers, when the economy is in an expansion phase the government transfers ____ and tax revenues____; hence, expansions (other things constant) generate government budget _____

Back 16

fall
rise
surpluses

Front 17

the existence of automatic stabilizers makes our economy ____ stable; they also make it ____ to distinguish discretionary from automatic fiscal policy

Back 17

more
difficult

Front 18

fiscal policy may involve changes in

Back 18

taxes and/or government spending

Front 19

an inflationary gap calls for

Back 19

a decrease in government spending and or/ increase in taxes

Front 20

a recessionary gap calls for

Back 20

deficit spending

Front 21

if an economy is already operating on its LRAS curve, an expansionary fiscal policy will eventually

Back 21

cause the price level to change more because real gdp will not change

Front 22

if government expenditures are financed by borrowing

Back 22

a federal deficit is created which could cause interest rates to rise

Front 23

higher interest rates will cause

Back 23

offsetting expenditure reductions in the private sector

Front 24

if interest rates rise as a result of deficit spending,

Back 24

then businesses and households may choose to cut back on purchases of investment goods and durable goods

Front 25

if households perceive and increase in federal deficit spending as an increase in their future tax liabilities

Back 25

they may save more now, which would reduce the effects of expansionary fiscal policy

Front 26

if government expenditures directly compete with the spending of the private sector,

Back 26

then business investment will fall and tend to offset the effects of such a fiscal policy

Front 27

crowding out implies that if federal deficits cause interest rates to rise,

Back 27

businesses reduce investments and this will tend to offset fiscal policy effects

Front 28

time lags make fiscal policy

Back 28

more difficult because of the uncertainty they generate

Front 29

if federal deficit spending causes interest rates to rise

Back 29

households will purchase less consumer durables and businesses will invest less

Front 30

if fiscal policy is pursued by raising marginal tax rates,

Back 30

laborers may choose to work less and businesses might choose to make fewer investments

Front 31

discretionary fiscal policy

Back 31

deals with actions by congress and the president intended to affect economic performance

Front 32

if a recessionary gap exists, proper fiscal policy could entail

Back 32

increased government spending
decreased taxes
deficit spending

Front 33

if government expenditures rise to counteract a recessionary gap

Back 33

the ad curve shifts rightward

Front 34

if an inflationary gap exists

Back 34

contractionary fiscal policy is appropriate

Front 35

if a recessionary gap exists

Back 35

it can be filled with increases in government spending or decreases in taxes or some combination of both

Front 36

the economy is operating on its short run aggregate supply curve and an inflationary gap exists,

Back 36

a contractionary fiscal policy is appropriate
leftward shifts in ad that cause some unemployment will be helpful
a contractionary fiscal policy will eventually change only the price level

Front 37

if an inflationary gap exists, it can most efficiently be eliminated by some combination of

Back 37

decreases in government spending and increases in taxes

Front 38

which of the following will not offset fiscal policy

Back 38

government spending financed by increased taxes
government spending financed by borrowing (deficit spending)
automatic stabilizers

Front 39

which of the following can offset expansionary fiscal policy

Back 39

higher interest rates resulting in deficit spending
private investment falling in areas competing with government expenditures
perceptions by households that larger deficits imply increased future tax liabilities

Front 40

which one of the following may well result from increase government borrowing resulting from deficit spending?

Back 40

higher interest rates

Front 41

if taxes fall then

Back 41

the aggregate demand curve shifts to the right

Front 42

if government expenditures exceed tax receipts then, other things being constant,

Back 42

a deficit exists

Front 43

if marginal tax rates rise

Back 43

laborers may choose less income (work), which is taxed and more leisure, which is not taxed
the tax base could shrink
productivity could fall eventually as business investment falls

Front 44

fiscal policy

Back 44

if difficult to implement because of time lag problems

Front 45

time lags make fiscal policy _____

Back 45

difficult

Front 46

crowding out reduces the impact of

Back 46

an expansionary fiscal policy

Front 47

the ricardian equivalence theorem implies that

Back 47

fiscal policy may be quite ineffective

Front 48

stabilization policy

Back 48

conscious attempt to achieve high employment and price stability

Front 49

discretionary fiscal policy

Back 49

change in tax law

Front 50

automatic stabilizer

Back 50

unemployment compensation

Front 51

recessionary gap

Back 51

recession period

Front 52

inflationary gap

Back 52

inflation period

Front 53

time lags

Back 53

recognition, action, effect

Front 54

deficit spending

Back 54

tax receipts less than government spending

Front 55

page 61 to 62

Back 55

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