Fiscal Policy
Distinguish between discretionary stabilization
policy and automatic stabilizers?
Give examples of how discretionary fiscal policy
might be used to stave off an economic downturn.
Give three examples of automatic stabilizers in the U.S.
economy.
How do automatic stabilizers
impact the federal budget during times of economic slowdown?
How does expansionary fiscal
policy impact the federal budget over the course of the cycle?
What is meant by the term
“crowding out”? What impact does
crowding out have on the size of the government expenditures multiplier? Explain.
What are the three time lags
that limit the effectiveness of discretionary fiscal policy? Explain each! Would these time lags apply equally to monetary policy?
How might a supply side tax
cut be targeted differently from a regular, Keynesian type stimulative tax cut?
A supply side tax cut would
be aimed at:
a)
shifting
the aggregate demand curve to the
right.
b)
shifting
the aggregate supply curve to the
left.
c)
moving
the economy down along the existing
aggregate supply curve.
d)
shifting
the aggregate supply curve to the right
The time elapsing between
the time of the onset of a policy and the results of that policy would be
called:
a)
fiscal
drag
b)
automatic
stabilization
c)
recognition
lag
d)
discretionary
stabilization
e)
action
lag
Which would be considered an
inappropriate policy measure (by a Keynesian) if the economy were in, or
threatened by, a
recession?
a)
increasing
government purchases
b)
raising
taxes
c)
running
a federal budget deficit
d)
combining
a tax cut with an increase in government spending
Which of the following would
not tend to act as an automatic
(or built-in) stabilizer for
the economy?
a)
unemployment
compensation benefits
b)
food
stamps
c)
a
progressive income tax system
d)
inheritance
taxes
e)
an
emergency tax cut by Congress