6. Fiscal policies tend to be automatic as a result of legislation. 7. Taxes always act as automatic stabilizers. 8. Contractionary monetary policies result to lower investment spending and higher incomes.

6. Fiscal policies tend to be automatic as a result of legislation. 7. Taxes always act as automatic stabilizers. 8. Contractionary monetary policies result to lower investment spending and higher incomes.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 16CTQ: Assume there is no discretionary increase in government spending. Explain how an improving economy...

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6. Fiscal policies tend to be automatic as a result of legislation.
7. Taxes always act as automatic stabilizers.
8. Contractionary monetary policies result to lower investment spending and higher incomes.
9. Inflation targeting is a mandate exclusive to the Bangko Sentral ng Pilipinas.
10. Expansionary monetary policies result to an increase in real GDP.

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QUESTION 7 07. What factors make an expansionary "stimulus" fiscal policy effective? a) A government budget deficit associated with fiscal stimulus should should borrow money from those who spend less and save more, to those who spend more and save less. b) A permanent decrease in taxes is more effective in stimulating spending than a temporary one c) An increase in government purchases of goods and services should be temporary and should not permanently displace private spending d) The most expansionary way of financing the budget deficit associated with a fiscal stimulus policy is by the central bank expanding the quantity of money in circulation. e) Infrastructure investment belongs with long-term growth policy, but invariably makes a poor element in stimulus policy because such investment normally take a long time to implement. f) All the above.
7 - If the government announces that it has increased the corporate tax rate from 25% to 35% and the income tax rate from 20% to 30%, what kind of policy will it follow?A) contractionary fiscal policyB) Supply-side policyC) contractionary monetary policyD) Expansionary monetary policyE) Expansionary fiscal policy
6. A reduction in government expenditure or an increase in taxes is defined as: expansionary monetary policy. contractionary fiscal policy. expansionary fiscal policy. contractionary monetary policy.
1. Give three examples of governments that are adept in the use of fiscal policy. 2. Give three examples of governments whose use of fiscal policy leaves a lot to be desired? Explain your thinking. 3. What is potential GDP? What role does it play in fiscal and monetary policies?
2) As an economist, identify and justify economic and fiscal policy measures that should be taken by the government of Oman to combat inflation and employment with the aim of reviving the economic condition of the country based on the following: a) Expansionary fiscal policy b) Contractionary fiscal policy c) Expansionary monetary policy d) Contractionary monetary policy
4. Fiscal policy affects aggregate demand because: government spending is a category of aggregate demand. taxes affect corporate spending and so investment. taxes affect disposable income and so consumption. all of the above.
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19. If an economy moves into a recession, causing that country to produce less than potential GDP, then: automatic stabilizers will cause tax revenue to decrease and government spending to increase. 2. automatic stabilizers will cause tax revenue to increase and government spending to decrease. 3. tax revenue and government spending will be higher because of automatic stabilizers. 4.tax revenue and government spending will be lower because of automatic stabilizers.
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