Homework Answers
An expansionary fiscal policy with tax cut or spending increases ,is generally done to increase aggregate demand.If an expansionary fiscal policy also leads to high interest rates , then firms and households do not get encouraged to borrow and spend as it usually occurs with tight monetary policy.As a result aggregate demand decreases. Thus we have seen that the direct effect of expansionary fiscal policy is to increase AD, but a rise in interest rate decreases AD.and fiscal policy becomes less powerful than it was before..This is called crowding out as government borrowing and spending leads to higher interest rates , and this in turn leads to decrease in business investment and also in household consumption.
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Practical problems of fiscal policy and its limitation. For example, compare a tax cut to infrastructure...
Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an...
Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. Expansionary fiscal policy Contractionary fiscal policy Not an example of fiscal policy Answer Bank a decrease in government spending an increase in corporate bonds purchased a decrease in transfer payments a decrease in the money supply a decrease in taxes an increase in the money supply a decrease in the unemployment rate an increase in tax rates an increase in...
1. When countries have severe debt problems: fiscal policy is an especially good idea. expansionary fiscal...
1. When countries have severe debt problems: fiscal policy is an especially good idea. expansionary fiscal policy can reduce real growth. it makes no difference for fiscal policy. they can continue to borrow forever without any adverse consequences. 2. Increases in government spending financed through additional borrowing will typically: lead to higher taxes. lead to higher interest rates. stimulate both consumption and investment. provide more stimulus than when government spending is financed through higher taxes. 3. In a recession, automatic...
Of the following examples, which is an example of an automatic fiscal policy stabilizer? A) Tax...
Of the following examples, which is an example of an automatic fiscal policy stabilizer? A) Tax revenues fall after Congress decreases corporate tax rates. B) Congress decides to cut spending on national parks. C) Congress increases individual income tax rates. D) Tax revenues increase as real GDP increases. From a bank’s perspective, which of these scenarios would be the MOST advantageous for it? A) Jacob pulls out cash from his account every month to pay all of this bills in...
Which of the following represents the most expansionary fiscal policy? Multiple Choice a $10 billion tax...
Which of the following represents the most expansionary fiscal policy? Multiple Choice a $10 billion tax cut a $10 billion increase in government spending a $10 billion tax increase a $10 billion decrease in government spending
Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient? Multiple Choice a $40 billion tax c...
Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient? Multiple Choice a $40 billion tax cut o $10 billion tax cut and $30 billion Increase in government spending o $20 billion tax cut and $20 billion increase in government spending o $40 bilion incresse in government spending
Which of the following expansionary fiscal policy changes would be most favored by those economists who think...
Expansionary fiscal policy ________________ to fight______________. increase the money supply and cut interest rates, recession. decrease...
Expansionary fiscal policy ________________ to fight______________. increase the money supply and cut interest rates, recession. decrease the money supply and raise interest rates, inflation. increase government spending and cut taxes, recession. decrease government spending and raise taxes, inflation.
QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a....
QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a. Tax revenues fall as real GDP decreases. b. Congress decides to cut spending on national defense. c. Congress cuts individual income tax rates. d. Tax revenues rise after Congress raises corporate tax rates. QUESTION 7 When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit. a....
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government...
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government bond sales to the public, for example—in the Keynesian and classical models. Include in your answer the effects of this policy shift on the level of real income, employment, the price level, and the rate of interest.
1. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that: A. the former deals with...
1. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that: A. the former deals with interest rates, and the latter deals with tax policy. B. the former is built into the system, whereas the latter requires timely decisions. C. the former requires timely decisions, whereas the latter is built into the system. D. the former deals with tax policy, and the latter deals with interest rates 2. An example of discretionary fiscal policy would be: A. the operation of...
- Collecting and spending federal tax revenue is an example of the government exercising its powers over public goods. f...
- Collecting and spending federal tax revenue is an example of the government exercising its powers over public goods. fiscal policy. the market process. monetary policy. monopoly power. - An increase in the U.S. money supply by the Federal Reserve constitutes a microeconomic government policy action. true or false
Classify each statement as an example of expansionary fiscal policy, contractionary fiscal policy, or not an example of fiscal policy. Expansionary fiscal policy Contractionary fiscal policy Not an example of fiscal policy Answer Bank a decrease in government spending an increase in corporate bonds purchased a decrease in transfer payments a decrease in the money supply a decrease in taxes an increase in the money supply a decrease in the unemployment rate an increase in tax rates an increase in...
Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient? Multiple Choice a $40 billion tax cut o $10 billion tax cut and $30 billion Increase in government spending o $20 billion tax cut and $20 billion increase in government spending o $40 bilion incresse in government spending
Which of the following expansionary fiscal policy changes would be most favored by those economists who think...
1. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that: A. the former deals with interest rates, and the latter deals with tax policy. B. the former is built into the system, whereas the latter requires timely decisions. C. the former requires timely decisions, whereas the latter is built into the system. D. the former deals with tax policy, and the latter deals with interest rates 2. An example of discretionary fiscal policy would be: A. the operation of...
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