ECN 204 Lecture Notes - Lecture 8: Aggregate Demand, Demand Curve, Longrun

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beigespider664

25 May 2016

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Ecn 204 lecture 8 chapter 13 & 14. Fiscal policy: the use of taxes, government transfers or government purchases of goods and services to shift the aggregated demand curve. Expansionary fiscal policy-increase in government purchases of goods and services, a reduction in taxes, or an increase in government transfers shifts the aggregate demand curve rightward. Also, it leads to an increase in real gdp. It can close the recessionary gap by shifting ad1 to ad2, moving the economy to a new short-run macroeconomic equilibrium, e2, which is also a long-run macroeconomic equilibrium. A contractionary fiscal policy reduced government purchases of goods and services, an increase in taxes, or a reduction in government transfers shifts the aggregate demand curve leftward. Also, it leads to a fall in real gdp. Realize the recessionary/inflationary gap by collecting and analyzing economic data takes time. Government develops a spending plan takes time. Implementation of the action plan (spending the money takes time.

Related Questions

Which of the following statement(s) about fiscal policy is/are true?

		A fiscal policy action to close a recessionary gap is to decrease taxes
		Fiscal policy may require time before it takes effect (lags)
		Expansionary fiscal policy can be achieved by increases in transfer payments and decreasing government purchases to pay for it.
		One potential problem with using fiscal policy to close recessionary output gaps is that sustained government deficits can be harmful to long-run economic growth.
		Fiscal policy may affect potential output as well as potential spending.
		The choices of government spending have little effect on fiscal policy since government spending is tied directly to the business cycle through Y=C+I+G+NX.
		A fiscal policy action to close an expansionary gap is to decrease government purchases
		Balanced budget fiscal policy is more effective than borrowing or re-paying government debt.

ceruleanmuskrat915

Fiscal policy is carried out primarily by

A) the Federal government.

B) state and local governments working together.

C) state governments alone.

D) local governments alone.

Fiscal policy refers to the:

A) manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

B) manipulation of government spending and taxes to achieve greater equality in the distribution of income.

C) altering the interest rate to change aggregate demand.

D) fact that equal increases in government spending and taxation will be contractionary.

Expansionary fiscal policy is so named because it:

A) involves an expansion of the nation's money supply.

B) necessarily expands the size of government.

C) is aimed at achieving greater price stability.

D) is designed to expand real GDP.

An appropriate fiscal policy for severe demand-pull inflation is:

A) an increase in government spending.

B) depreciation of the dollar.

C) a reduction in interest rates.

D) a tax rate increase.

29. The amount by which government expenditures exceed revenues during a particular year is the:

A) public debt.

B) budget deficit.

C) full-employment.

D) GDP gap.

30. If actual GDP is greater than potential GDP, we have

A) a negative GDP gap

B) a positive GDP gap

C) minimum GDP gap

D) maximum GDP gap

31. Money functions as:

A) a store of value.

B) a unit of account.

C) a medium of exchange

D) all of the choices

pinkhedgehog911

1. Discretionary fiscal policy refers to:

A. Any change in government spending or taxes that destabilizes the economy.

B. The authority that the President has to change personal income tax rates.

C. Intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

D. The changes in taxes and transfers that occur as GDP changes.

2. Countercyclical discretionary fiscal policy calls for:

A. Surpluses during recessions and deficits during periods of demand-pull inflation.

B. Deficits during recessions and surpluses during periods of demand-pull inflation.

C. Surpluses during both recessions and periods of demand-pull inflation.

D. Deficits during both recessions and periods of demand-pull inflation.

3. Contractionary fiscal policy is so named because of it:

A. Involves a contraction of the nation's money supply.

B. Necessarily reduces the size of government.

C. Is aimed at reducing aggregate demand and thus achieving price stability.

D. Is expressly designed to expand real GDP.

brownsea-lion330

ECN 204 Lecture Notes - Lecture 8: Aggregate Demand, Demand Curve, Longrun

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