Fiscal Policy refers to the idea that aggregate demand is affected by changes in Question 58 options: a) the interest rate b) government spending and taxation policy c) trade policy d) all of the above
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- From an initial long-run equilibrium, if aggregate demand grows slower than long-run aggregate supply while the short-run aggregate supply is unchanged, then the proper fiscal policy is to Group of answer choices increase government purchases. decrease government purchases and tax rates by the same amount. increase the money supply. increase lump-sum taxes.Expansionary fiscal policy will: a shift the aggregate demand curve left. b shift the aggregate demand curve right. c shift the short-run aggregate supply curve left.Supply-side fiscal policy targets which of the following? A) Long-run Aggregate Supply B) Short-run Aggregate Demand C) Short-run Aggregate Supply D) Long-run Aggregate Demand
- Tax cuts shift aggregate demand A. right as do increases in government spending. B. left while increases in government spending shift aggregate demand right. C. left as do increases in government spending. D. right while increases in government spending shift aggregate demand left.Automatic stabilizers: A) counteract both recessions and expansions through changes in spending without government action. B) are government programs to employ workers during recessions. C) create government budget surpluses during economic recessions. D) are designed to reduce the price level directly.Increased government spending on interstate highways, public housing projects, and defense projects are all ways that the federal government can Question 37 options: a) shift the aggregate demand curve to the left b) shift the short-run aggregate supply curve to the left c) close a recessionary gap d) close an inflationary gap
- For each of the following fiscal policy proposals, determine whether the primary focus is on aggregate demand or aggregate supply or both: i. $1,000 per person tax reduction ii. a 5% reduction in all tax rates iii. Pell Grants, which are government subsidies for college education iv. government-sponsored prizes for new scientific discoveries v. an increase in unemployment compensation (i) both; (ii) supply-side; (iii) supply-side; (iv) both; (v) demand-side (i) demand-side; (ii) both; (iii) supply-side; (iv) supply-side; (v) both (i) demand-side; (ii) both; (iii) both; (iv) supply-side; (v) demand-side (i) supply-side; (ii) demand-side; (iii) demand-side; (iv) both; (v) both (i) supply-side; (ii) supply-side; (iii) demand-side; (iv) both; (v) bothLabel each of the following scenarios in which there are problems enacting and applying fiscal policy as being an example of either recognition lag, administrative lag, or operational lag. To fight a recession, Congress has passed a bill to increase infrastructure spending but the legally required environmental impact statement for each new project will take at least two years to complete before any building can begin. Distracted by a war that is going badly, politicians take no notice until inflation reaches 8 percent. A sudden recession is recognized by politicians, but it takes many months of political deal making before a stimulus bill is finally approved. To fight a recession, the president orders federal agencies to get rid of petty regulations that burden private businesses – but the federal agencies begin by spending a year developing a set of regulations on how to remove petty regulations.Supply-side fiscal policy initiatives include the following items EXCEPT: Group of answer choices R&D tax credits Education policies (subsidies or tax breaks) Lower corporate profit tax rates Open market operations
- Aggregate supply (AS) changes with each of the following except: Fiscal policy and monetary policy Potential GDP changes The money wage rate changes The money prices of other resources changeAutomatic stabilizers refer to the money supply and interest rates that automatically increase or decrease along with the business cycle. government spending and taxes that automatically increase or decrease along with the business cycle. changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.Identify one fiscal policy action that could counter the increase in investments. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates
