![]() The balanced budget multiplier is based on the point that the _ multiplier is larger than the _ multiplier so that an equal increase in government expenditure and taxes _ aggregate demand.Į) expenditure tax increases e) expenditure tax increases Ignoring any supply-side effects, if government expenditure on goods and services decrease by $10 billion and taxes decrease by $10 billion, then real GDP _ and the price level _.Į) does not change does not change d) decreases falls An economy is at a short-run equilibrium as illustrated in the above figure. a) different in size and the government expenditure multiplier is larger. ![]() The government expenditure multiplier and the tax multiplier areĪ) different in size and the government expenditure multiplier is larger.ī) not comparable because the government c) expenditure multiplier applies to aggregate demand and the tax multiplier applies to aggregate supply.ĭ) not comparable because the government expenditure multiplier applies to aggregate supply and the tax multiplier applies to aggregate demand.Į) different in size and the tax multiplier is larger. d) decreases by more than $30 billion and real GDP decreases If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demandĮ) increases by more than $100 billion. ![]() ![]() If the government reduces expenditure on goods and services by $30 billion, then aggregate demandĪ) increases by more than $30 billion and real GDP increases.ī) increases by $30 billion and real GDP increases.Ĭ) increases and potential GDP increases.ĭ) decreases by more than $30 billion and real GDP decreases.Į) decreases by $30 billion and real GDP decreases. ![]() government has generally had a government budget _ and so the national debt has _.Į) deficit decreased deficit increased Automatic stabilizers are defined asĪ) policy that stabilizes without the need for action by the governmentī) actions taken by the President without Congressional consent to stabilize the economyĬ) actions taken by an act of Congress to stabilize the economyĮ) discretionary policy taken to stabilize the economy policy that stabilizes without the need for action by the government An example of automatic fiscal policy isĪ) a change in taxes that has no multiplier effectī) Congress passing a tax rate reduction packageĬ) expenditure for unemployment benefits increasing as economic growth slowsĭ) the Federal Reserve reducing interest rates as economic growth slowsĮ) the federal government expanding spending at the Department of Education expenditure for unemployment benefits increasing as economic growth slows Induced taxes are defined as taxesĪ) enacted by Congress that explicitly state the amount to be paidĬ) that rise in recessions and fall in expansionsĭ) that are avoided with the use of legal tax sheltersĮ) we are forced to pay for services from the government that vary with real GDP Needs-tested spending is defined asĪ) spending by Congress on its own perks of officeī) taxes paid by those qualified by their incomeĬ) spending on programs for people qualified to receive benefitsĭ) spending by the President on the White HouseĮ) spending that increases in expansions and decreases in recessions spending on programs for people qualified to receive benefits In a recession, needs-tested spending _ and induced taxes _.Į) increases increase increases decrease If government expenditure on goods and services increase by $100 billion, then aggregate demandĮ) increases by more than $100 billion increases by more than $100 billion Discretionary fiscal policy is a fiscal policy action, such asĪ) an increase in payments to the unemployed, initiated by the state of the economy.ī) a tax cut, initiated by an act of Congress.Ĭ) a decrease in tax receipts, initiated by the state of the economy.ĭ) an interest rate cut, initiated by an act of Congress.Į) an increase in the quantity of money b) a tax cut, initiated by an act of Congress. ![]()
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