Government expenditures, G. and tax revenues, T Refer to the figure Deficit GDP, Real a. The cyclically ac of GDP. O actual O normal O full-emplo O equilibriur
Government expenditures, G. and tax revenues, T Refer to the figure Deficit GDP, Real a. The cyclically ac of GDP. O actual O normal O full-emplo O equilibriur
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter30: Government Budgets And Fiscal Policy
Section: Chapter Questions
Problem 50CTQ: During the Great Recession of 20082009, what actions would have been required of Congress and the...
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please answer b), c), d)
Transcribed Image Text:Government expenditures, G.
and tax revenues, T
Refer to the figure below to answer the questions that follow.
Surplus
G
Deficit
GDP,
GDP,
GDP,
Real domestic output, GDP
level
a. The cyclically adjusted budget measures what the federal deficit or surplus would be if the economy reached the
of GDP
O actual
O normal
O full-employment
O equilibrium
Transcribed Image Text:b. If the cyclically adjusted budget is balanced, then
O government is engaging in either expansionary or contractionary policy.
O the actual budget is in surplus.
government is not engaging in either expansionary or contractionary policy.
O the actual budget is also balanced.
c. Suppose the full-employment, noninflationary level of real output is GDP3 (not GDP2) in the economy depicted in the figure. If the
economy is operating at GDP2 instead of GDP3, its current fiscal policy is
O contractionary, since a surplus would exist.
O contractionary, since a deficit would exist.
O balanced, since there is no deficit.
O expansionary, since a surplus would exist.
d. If the government wants to move the economy to full employment, it should
O cut taxes or increase spending.
O increase taxes or increase spending.
O cut taxes or decrease spending.
O cut taxes or keep spending constant.
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