(2) Increasing debt puts financial pressure in future government budgets. Problems related to rising debt (1) Public debt may crowd out private investment spending - they compete for loanable funds, and interest rates might increase, giving disincentives for the private sector to invest. recessionary less than less than Government tax revenues _ during an expansion and _ during a recession, which leads to larger budget deficits during the _ phase of the business cycle.Public debt: definition refers to federal government debt held by individuals and institutions outside the government. recessionary increase decrease In the figure above, to use fiscal policy to move the economy back to potential GDP, the government must increase government expenditure by _ $1 trillion and/or decrease taxes by _ $1 trillion. To close the gap, the government can _ government expenditure and/or _ taxes. To close the gap, the government can _ government expenditure and/or _ taxes recessionary increase decrease In the figure above, the _ gap is one trillion dollars. recessionary $1 trillion In the figure above, the _ gap is one trillion dollars. In the figure above, the _ gap is equal to _. recessionary less than *look at drawing from 29 To close the gap, the government can change expenditure by _ one trillion dollars. In the figure above, the _ gap is one trillion dollars. A fiscal stimulus works to close a recessionary gap by shifting the AD curve rightward *look at drawing An appropriate fiscal policy option to move the economy to full employment is to increase government expenditure and move the economy to a full-employment equilibrium at point b. If the government uses fiscal policy to close a recessionary gap, government expenditure can be increased by less than the gap because of the government expenditure multiplier Ignoring any supply-side effects, to close a recessionary gap of $100 billion with a government expenditure multiplier of 5, the government could *look at drawingĪn economy is at a short-run equilibrium as illustrated in the above figure. To increase real GDP, the government can use a fiscal stimulus of decreasing taxes and/or increasing government expenditure. a recessionary increases aggregate demand In order to help the economy recover from a recession using fiscal policy, the government can _ so that aggregate demand increases cut taxes Which of the following is an example of a fiscal stimulus? decrease in taxes Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. If the economy is in equilibrium with real GDP less than potential GDP, there is _ gap and a fiscal policy that _ is appropriate. If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demand increases by more than $100 billion. If government expenditures on goods and services increases by $20 billion, then aggregate demand increases by more than $20 billion The tax multiplier is the magnification effect of a change in taxes on aggregate demand. The government expenditure multiplier is used to determine the amount aggregate demand is affected by a change in government expenditure. Discretionary fiscal policy is a fiscal policy action, such as a tax cut, initiated by an act of Congress. This action is called a discretionary fiscal policy. In 2009, Congress passed tax laws to reduce income tax rates for some taxpayers. Discretionary fiscal policy is defined as fiscal policy initiated by an act of Congress. increases decrease Automatic stabilizers decrease the impact of a recession on the level of economic activity because they mean disposable income does not change by as much as real GDP. In a recession, needs-tested spending _ and induced taxes _. Automatic stabilizers include changes in induced taxes and changes in needs-tested spending.
0 Comments
Leave a Reply. |