ECON 1 Lecture Notes - Lecture 12: Fiscal Policy, Aggregate Demand, Government Spending

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coffeecoyote277

6 Aug 2015

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Econ1 - introduction to economics - lecture 12: fiscal policy. Taxes, government purchases of goods and services, transfers, and borrowing. Funds flow into the government in the form of taxes and government borrowing. Funds flow out of the government in the form of government purchases of goods and services and government transfers to households. Gdp = c + i + g + x - im. Expansionary fiscal policy increases aggregate demand and can take one of three forms: An increase in government purchases of goods and services. Contractionary fiscal policy policy reduces aggregate demand and can take one of three forms: A reduction in government purchases of goods and services. There are three arguments against the use of expansionary fiscal policy: Government spending always crowds out private spending. Government borrowing always crowds out private investment spending. Government budget deficits lead to reduced private spending.

Related Questions

1. If government tax policy requires Jane to pay $28,000 in taxes on an annual income of $200,000 and Mary to pay $10,000 in tax on the annual income of $100,000, then the tax policy is:

		regressive.
		progressive.
		proportional.
		optional.

2. When increasing oil prices cause aggregate supply to shift to the left, then:

		unemployment and inflation decrease.
		unemployment decreases and inflation increases.
		unemployment and inflation increase.
		unemployment increases and inflation decreases.

3. What do goods like gasoline, tobacco, and alcohol typically share in common?

		A progressive tax is imposed on each of them.
		A regressive tax is imposed on each of them.
		They are all subject to government excise taxes.
		They are all subject to government fiscal taxes.

4. When inflation begins to climb to unacceptable levels in the economy, the government should:

		use contractionary fiscal policy to shift aggregate demand to the right.
		use contractionary fiscal policy to shift aggregate demand to the left.
		use expansionary fiscal policy to shift aggregate demand to the right.
		use expansionary fiscal policy to shift aggregate demand to the left.

rubykangaroo105

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

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

ECON 1 Lecture Notes - Lecture 12: Fiscal Policy, Aggregate Demand, Government Spending

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