When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 3P

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Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
Asap both 1.a) Which of the following statements is correct?l.Expansionary fiscal policy is used to remove a recessionary gap.ll. Expansionary fiscal policy is used to shift AD right.A) l onlyB) I onlyC)both I and ID) neither I nor ll 1.b) Which of the following are examples of contractionary fiscal policy?A) decreasing government expendituresB) increasing taxesC) increasing transfer paymentsD) A and B are both contractionary fiscal policiesE) A, B, and C are all contractionary fiscal policies
Suppose the government implements fiscal consolidation by cutting spending while the nominal interest rate is already at zero or near zero percent. Given πeequals to π ̅ , fiscal consolidation will likely lead to: a. Increasing inflation, decreasing real interest rate and a recession b. Increasing inflation and real interest rates, and a recession c. Deflation spiral, decreasing real interest rate and a recession d. Deflation spiral, increasing real interest rate and a recession e. All of the answers here are incorrect
Suppose the government decides to decrease taxes in an effort toincrease consumer spending and investment in the economy.(a) Will this plan succeed in accomplishing both goals?(b) In equilibrium, what happens to interest rates as a result of this action?(c) Would you characterize this as a case of fiscal crowding out? Explain.
a) Suppose that there are no crowding-out effects and the MPC is 0.8. By how much must the government increase expenditures shift the aggregate-demand curve right $10 billion? b. The model of Long-run Growth, proposes that fiscal policy can have lasting effects on savings, investment, and economic growth. On the other hand, the model of Aggregate Demand-Aggregate Supply suggests that the only long run effect of fiscal policy is an increase in the price level. How could you use the Aggregate Demand and Aggregate Supply model for a more accurate description of the short-run and long-run effects of an increase in government spending? Could you distinguish between different uses of government expenditures to predict their effects on prices and output?
(a) Assuming an economy is experiencing inflation, what are discretionary fiscal policy options that can be utilized by the government to address the situation? (b) Assuming an economy is in a recession, what are discretionary fiscal policy options that can be utilized by the government to move the economy out of the recession? (c) What is the difference between discretionary fiscal policy options and automatic stabilizers and explain how automatic stabilizers can be applied in an inflationary economy and a recessionary economy.
What is the crowding-out effect? How does it modify the implications of the basic Keynesian model with regard to fiscal policy? How does the ne classical theory of fiscal policy differ from the crowding-out model?
Fiscal policy consists of the executive branch's decisions to tax and spend. If the economy is in an expansionary mode just coming out of a recession, in regards to aggregate demand and aggregate supply, we can assume that a tax hike will lead to a. aggregate supply to shift inward. b. the economy expanding even more as a result. c. aggregate demand to shift inward. d. no changes will occur. e. aggregate demand and supply to shift inward.