Christina's Quizlet - Assignment Essays

question

Categorize the following statements as either true or false:

1.) Congress can pass budget laws only once a year.

2.) For the US budget, the fiscal year runs from Jan. 1 to Dec. 31.

3.) The President has veto power to eliminate specific items in a budget bill and approve others.

4.) Congress debates and amends the President's budget proposals and enacts a budget before the start of the fiscal year on October 1st.

answer

1. False
2. False
3. False
4. True

question

Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal policy?

answer

making the initial budget proposal in February

question

News Clip: Economy Needs Treatment:
"It's the debt, stupid! Only when the government sets out a credible business plan will confidence and hiring rebound."

Question:
A "credible business plan" for the government to adopt is a plan to ______.

answer

decrease government expenditure.

question

Which components of government outlays and receipts contributed most to the huge budget deficits in 2011 and 2012?

answer

government expenditure and transfer payments

question

The time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as:

answer

a recognition lag.

question

According to the graph (click on link), if the solid line represents the GDP without policy and the dotted line includes policy, which side shows an inappropriate stabilization policy?

https://kf1.amplifire.com/amp/Resource?path=7120a336-64e2-4bcc-a10f-827a1d22230e/9f/9fa0e93c-9b76-41ba-9519-9ed693491325.png&originalFileName=mac7_q5.png

answer

Graph B, when Real GDP WITH policy is above Real GDP WITHOUT policy

question

One of the primary goals of most governments with regard to the economy is:

answer

full employment

question

Every time the federal government runs a budget deficit, the government must:

answer

borrow, which adds to the government debt.

question

Supply-side economics emphasizes the role that __________ play in the supply of output in the economy.

answer

taxes

question

Supply-side economists point to the Laffer curve as evidence that higher taxes:

answer

can lead to lower overall government revenues.

question

Which type of fiscal policy would cause the shift of the AD curve to the right to AD1?

answer

higher govt. spending

question

We would expect the tax multiplier to be __________ in absolute value than the government purchases multiplier.

answer

smaller

question

Which of these is an example of an automatic fiscal policy?

answer

an unemployment benefit program

question

__________ maintains that tax policy can either create or destroy incentives to work, save, and invest.

answer

Supply-side theory

question

In 2008, spending on Social Security, Medicare and Medicaid was less than 10% of the GDP. By 2030 this amount is expected to be around 17% of GDP. One government option to solve this problem is to:

answer

decrease benefits

question

Many economists believe that increases in government debt are not necessarily problematic if the funds are used:

answer

to build infrastructure

question

Which of these is the main reason for the long-run funding problems of Social Security?

answer

Demographic changes

question

Many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to:

answer

the presence of time lags.

question

Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.

answer

automatic fiscal policy

question

What shift in the aggregate demand curve best represents the impact of a decrease in government spending through the multiplier process?

answer

a continuous decreasing (shifting to the left) shift in the AD curve.

Reference this link of a picture of this motion: https://kf1.amplifire.com/amp/Resource?path=7120a336-64e2-4bcc-a10f-827a1d22230e/9b/9b3a459f-b8c7-42c8-96d2-32e66a36fe9b.png&originalFileName=mac5_q18.png

question

When the economy is in a recession, the government can:

answer

increase government purchases or decrease taxes in order to increase aggregate demand.

question

The decline in private expenditures that results from an increase in government borrowing is known as:

answer

crowding out.

question

Which of these are the largest sources of federal government revenues?

answer

Personal income taxes and Social Security taxes

question

Changes in tax rates impact the economy through:

answer

both aggregate demand and aggregate supply.

question

Which of the following statements about U.S. government receipts is CORRECT?

answer

Federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades.

question

The structural budget deficit or surplus:

answer

is measured as if the economy were at full employment.

question

If the federal government's expenditures are less than its revenue, there is a __________.

answer

budget surplus

question

A government that collects more in taxes than it spends experiences a:

answer

budget surplus

question

Budget deficits automatically __________ during recessions and __________ during expansions.

answer

increase, decrease

question

According to supply-side theory, fiscal policymakers can combat the impact of recessions by:

answer

lowering tax rates.

question

The largest and fastest growing category of federal expenditures is __________.

answer

transfer payments.

question

Most economists would __________ a balanced federal budget mandate.

answer

not be in favor of

question

A government that spends more than it collects in taxes experiences a:

answer

budget deficit

question

When the economy is at full employment, a cut in household taxes will __________.

answer

increase consumption.

question

The American Recovery and Reinvestment Act of 2009 is a clear example of:

answer

discretionary fiscal stimulus.

question

Which of these fiscal policy actions will increase real GDP in the short run?

answer

An increase in government expenditures

question

The government debt is best measured as the:

answer

sum of past budget deficits minus the sum of past budget surpluses.

question

What happens when government spending is greater than government tax revenues?

answer

There is borrowing by the government and the government debt rises.

question

Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

answer

Increasing income tax rates

question

Government policies that increase aggregate demand are called __________.

answer

fiscal stimulus

question

What is the budget balance when real GDP is $5 trillion?

The chart read that when the Real GDP is $5 trillion, the receipts were 0.3 and the Outlays were 0.3.

answer

0.0 trillion dollars

question

The tax wedge is the gap between the before-tax and after-tax ______.

answer

wage rates

question

The graph shows the outlays and receipts curves for an economy.

Draw a vertical line at a value of potential GDP at which a structural surplus exists. Label it 1.

Draw a vertical line at a value of potential GDP at which a structural deficit exists. Label it 2.

answer

https://o.quizlet.com/zjXPk0fA44lyMEZ3tVRpvg_b.png

question

The structural surplus or deficit ______.

answer

is the budget balance that would occur if the economy were at full employment

question

The division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits, is the ______.

answer

generational imbalance

question

Draw a curve that shows the relationship between the tax rate and the amount of tax revenue collected.

answer

https://o.quizlet.com/FNBQLi0QXnaUvsJhD1VjNg_b.png

question

This question goes with the graph before:

The relationship between the tax rate and the amount of tax revenue collected is called the ______ curve.

This curve shows that ______.

answer

Laffer;
tax cuts can increase tax revenue

question

Draw a demand for loanable funds curve and a supply of loanable funds curve. Label them DLF0 and SLF0.

Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1.

Now the government imposes a tax on capital income.

Draw a curve that shows the effect of this tax. Label it.
Draw a point at the new equilibrium interest rate. Label it 2.

Draw a point to show the new after-tax interest rate. Label it 3.

answer

https://o.quizlet.com/H64qr701XZcrz-GTVzYeeQ_b.png

question

This question goes with the graph before:

The quantity of investment and borrowing that firms plan to undertake depends on ______.

answer

how productive capital is and what it costs

question

A country has been in existence for only two years.
In the first year, receipts were $1.0 million and outlays were $1.5 million.
In the second year, receipts were $1.5 million and outlays were $2.0 million.
At the end of the second year, the government had issued debt worth ______.

answer

$1 million

question

The graph shows the outlays and receipts curves for an economy.

Actual real GDP is $13 trillion.

Draw a vertical line that shows a value of potential GDP such that the economy has a cyclical deficit. Label the line.

answer

https://o.quizlet.com/WSV1SOwTygeHfu9vrtvSgQ_b.png

question

The cyclical surplus or deficit ______.

answer

is the actual surplus or deficit minus the structural surplus or deficit

question

Prior to the Great Depression, the purpose of the federal budget was to ______.

answer

finance federal govt programs and activities

question

Choose the statement that is INCORRECT:

A. When full employment returns in 2018, the CBO says that the cyclical deficit will continue to be large.

B. According to the CBO, the U.S. economy had a structural deficit in 2012.

C. According to the CBO, the U.S. economy had a cyclical deficit in 2012.

D. The structural deficit was small in 2007, increased in 2008, and exploded in 2009.

answer

A. When full employment returns in 2018, the CBO says that the cyclical deficit will continue to be large.

question

A fall in real GDP that results in a decrease in personal income tax receipts is an example of ______.

answer

automatic fiscal policy

question

Choose the statement that is INCORRECT:

A. The consensus is that the crowding out effect is strong enough to make the govt. expenditure multiplier less than 1.
B. The govt. expenditure multiplier is the quantitative effect of a change in govt. expenditure on real GDP
C. The tax multiplier is the quantitative effect of a change in taxes on real GDP
D. The Demand-side effects of a tax cut are likely to be larger than an equivalent increase in govt. expenditure

answer

D. The Demand-side effects of a tax cut are likely to be larger than an equivalent increase in govt. expenditure

question

When an economy is below full employment and the government has a budget deficit, that deficit ______.

answer

exceeds the structural deficit

question

Choose the statement that is INCORRECT:

A. The budget provides automatic stimulus in a recession to help shrink the recessionary gap.

B. When the economy expands, needs-tested spending decreases

C. Tax revenues and needs-tested spending change automatically in response to the state of the economy

D. When real GDP decreases in a recession, the poor become poorer, but at the same time the rich become richer and tax revenues increase

answer

D. When real GDP decreases in a recession, the poor become poorer, but at the same time the rich become richer and tax revenues increase

question

When a tax is applied to labor income, the result is a ______ full-employment quantity of labor and a ______ potential GDP.

answer

Smaller; lower

question

The ______ is an amount of money that, if invested today, will grow to equal a given future amount when the interest that it earns is taken into account.

answer

present value

question

The graph shows an economy in a below full-employment equilibrium.

To restore full employment, the government increases government expenditure by $0.5 trillion.

Draw a curve that shows the effect if this increase in government expenditure is the only change in spending plans. Label it AD0+Upper DeltaE.

The increase in government expenditure sets off a multiplier process.

Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD1.

Draw a point at the long-run equilibrium.

answer

https://o.quizlet.com/4N2cUkvJFe2ZszC40tJmBA_b.png

question

Fiscal imbalance is the ______ value of the government's commitments to pay benefits minus the ______ value of its tax revenues.

answer

present; present

question

Choose the CORRECT statements:

1. Upper A persistent budget deficit feeds itself.A persistent budget deficit feeds itself.

2. U.S. government debt left parenthesis as a percentage of GDP right parenthesis was at an all dash time high at the end of World War II.U.S. government debt (as a percentage of GDP) was at an all-time high at the end of World War II.

3. In 2014 comma Germany had a budget deficit.In 2014, Germany had a budget deficit.

4. Since 2002 comma U.S. government debt has been decreasing.

answer

Statements 1 and 2

question

Potential GDP is $12 trillion and if real GDP equaled potential GDP, the budget deficit would be $1 trillion.
Real GDP actually equals $14 trillion and the budget surplus is $3 trillion.
The economy has a structural ______ and a cyclical ______.

answer

deficit of $1 trillion; surplus of $4 trillion

question

The figure shows the labor market when an income tax is imposed.
The tax wedge is ______.

answer

$15/ hour

question

If a structural surplus exists but the government's budget is balanced, then ______.

answer

real GDP < Potential GDP

question

Fiscal policy attempts to achieve all of the following objectives except ______.

A. a stable money supply
B. sustained economic growth
C. full employment
D. price level stability

answer

A. a stable money supply

question

An accounting system that measures the lifetime tax burden and benefits of each generation is called ______.

answer

generational accounting

question

An increase in the income tax rate is an example of ______.

answer

discretionary fiscal policy

question

Choose the statement that is INCORRECT:

A. If the only consequence of increased govt. expenditure is crowding-out of investment, the govt. expenditure multiplier is less than 1.

B. An increase in govt. expenditure increases govt. borrowing (or decreases govt. lending if there is a budget surplus) and lowers the real interest rate.

C. The govt. expenditure multiplier is the quantitative effect of change in govt. expenditure on real GDP.

D. If the only consequence of increased govt. expenditure is an increase in consumption expenditure, the govt. expenditure multiplier is greater than 1.

answer

B. An increase in govt. expenditure increases govt. borrowing (or decreases govt. lending if there is a budget surplus) and lowers the real interest rate.

question

Choose the statement that is INCORRECT:

A. A tax on capital income lowers the quantity of saving and investment

B. A tax on capital income creates a tax wedge

C. A tax on capital income slows the growth rate of real GDP

C. A tax on capital income slows the growth rate of real GDP

D. The true tax rate on interest income is lower than that on labor income because of the way in which inflation and taxes on interest income interact

answer

D. The true tax rate on interest income is lower than that on labor income because of the way in which inflation and taxes on interest income interact

question

The graph shows the demand for labor curve and supply of labor curve for an economy.

Draw a point at the equilibrium real wage rate and equilibrium quantity of labor. Label it 1.

Now the government imposes a tax on labor income.

Draw a curve that shows the effect of this tax. Label it.
Draw points at the new equilibrium quantity of labor to show:
1) the before-tax wage rate. Label it 2.
2) the after-tax wage rate. Label it 3.

answer

https://o.quizlet.com/3FYjYpl1oClPTUNDDy1u3A_b.png

question

When the government imposes a tax on labor income, ______ the production function occurs and potential GDP ______.

answer

a leftward movement along; decreases

question

Potential GDP is $10 trillion and actual real GDP is $8 trillion.
The economy has a structural deficit of $1.5 trillion and an actual deficit of $2 trillion.
The cyclical deficit is ______.

answer

$0.5 trillion

question

Expansionary fiscal policy when the economy is below full employment ______ aggregate demand and real GDP, and the price level ______.

answer

increases; rises

question

Draw a Laffer curve. Label it.

Draw a point on the curve at the tax rate that generates the maximum tax revenue. Label it T*.

Draw a point on the curve that shows the approximate location of the United States on the curve. Label it United States.

answer

https://o.quizlet.com/GPqKbcHUJcNPiQp5EkFH4g_b.png

question

According to the previous graph, Choose the CORRECT statement:

A. A lower tax rate brings greater tax revenue

B. A higher tax rate brings in more revenue per dollar earned, so a higher tax rate brings in greater tax revenue

C. For tax rates below T*, a decrease in the tax rate increases tax revenue

D. Tax cuts can increase tax revenue

answer

D. Tax cuts can increase tax revenue

question

Four alternative fiscal policy changes that could be made to help the federal government meet its Social Security obligations are _______ income taxes, ________ Social Security taxes, _________ Social Security benefits, and ________ federal government discretionary spending.

answer

raise, raise, cut, cut

question

Choose the statement about U.S. international debt that is INCORRECT:

A. In June 2014, the US had a net debt to the rest of the world of $11.7 trillion

B. About 48% of the US govt. debt is held by foreigners

C. To repay the international debt, US saving must increase and consumption must decrease

D. Borrowing from the rest of the world as a source of loanable funds decrease during the late 1990s and 2000s

answer

D. Borrowing from the rest of the world as a source of loanable funds decrease during the late 1990s and 2000s

question

Tax revenues ______ during a recession.
Needs-tested spending ______ during an expansion.

answer

decrease, decreases

question

The table shows the receipts and the outlays of a nation at each level of real GDP.

What is the budget deficit when real GDP is $4 trillion?

The table said that when the real GDP is $4 trillion, the receipts were $0.2 trillion and the outlays were 0.4.

answer

$0.2 trillion

question

The _______ lag is the time it takes Congress to pass the laws needed to change taxes or spending.

answer

law-making

question

An economy at a full-employment equilibrium experiences an increase in aggregate demand.

The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______.

answer

falls below; rise.

question

The graph shows the aggregate demand curve, short-run aggregate supply curve, and the long-run aggregate supply curve.

Draw a curve that shows the effect of an increase in the quantity of money. Label it C1.

Draw a curve that shows the money wage rate response that returns the economy to potential GDP. Label it C2.

Draw a curve that shows the effect of another increase in the quantity of money. Label it C3.

Draw a curve that shows the money wage rate response that returns the economy to potential GDP. Label it C4.

Draw a point at the new price level and real GDP when the economy returns to its new long-run equilibrium.

answer

https://o.quizlet.com/kWgzSV7POFvaqCiiQX6xnQ_b.png

question

A cost-push rise in the price level can arise from an increase in _______.

answer

the money wage rate or money prices of raw materials.

question

An economy is at potential GDP when it experiences an increase in costs.
The economy experiences _______.

answer

stagflation.

question

A stagflation can turn into a cost-push inflation process when _______.

answer

the quantity of money persistently increases.

question

The graph shows the aggregate demand curve, short-run aggregate supply curve, and long-run aggregate supply curve for this year.

Draw a point at the price level and real GDP next year, if an inflation is correctly expected.

answer

https://o.quizlet.com/fLwH7hanTURwf8MV2SmPog_b.png

question

This question is from the graph before:
If inflation is expected, _______.

answer

neither a cost-push inflation nor a demand-pull inflation occur.

question

The best forecast available, which is based on all the relevant information is called _______.

answer

a rational expectation.

question

If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.

answer

a demand-pull rise in the price level.

question

The graph shows the aggregate demand curve, short-run aggregate supply curve, and long-run aggregate supply curve.

Draw a curve that shows the effect of a rise in the price of oil. Label it.

Draw a point at the new equilibrium in the economy.

answer

https://o.quizlet.com/JhUmc64lCSE49ENx4MggTQ_b.png

question

This question comes from the graph before:
A rise in the price of oil creates _______.

answer

a one-time cost-push rise in the price level

question

A stagflation can turn into a cost-push inflation process when _______.

answer

the quantity of money persistently increases.

question

Draw the short-run Phillips curve if the natural unemployment rate is 4 percent and the expected inflation rate is 2 percent a year. Label it.

Draw a point at the natural unemployment rate and the expected inflation rate.

answer

https://o.quizlet.com/lwUTsa9HbgG8y.wvTlE4Pg_b.png

question

This question is from the graph before:
Along the short-run Phillips curve, ______.

answer

the expected inflation rate and the natural unemployment rate are constant.

question

Along the long-run Phillips curve, _______.

answer

the unemployment rate is constant at the natural unemployment rate

question

Draw the short-run Phillips curve if the expected inflation rate is 5 percent a year. Label it SRPC1.

Draw a point at the expected inflation rate and the natural unemployment rate. Label it 1.

Draw the short-run Phillips curve if the expected inflation rate is 15 percent a year. Label it SRPC2.

Draw a point at the expected inflation rate and the natural unemployment rate. Label it 2.

answer

https://o.quizlet.com/jaiI4JqrURZ5y4FZkwzZ8Q_b.png

question

This question goes with the graph before:
A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand.

answer

up; unexpected

question

If the natural unemployment rate increases and the expected inflation rate remains constant, then ______.

answer

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward

question

Choose the statement about the long-run Phillips curve that is incorrect:

A. It tells us that any expected inflation rate is possible at the natural unemployment rate.

B. An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.

C. It shows the relationship between inflation and unemployment when the actual inflation rate equals the expected inflation rate.

D. It is vertical at the natural unemployment rate.

answer

B. An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.

question

If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.

answer

the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift

question

The natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a year.

Draw the long-run Phillips curve. Label it LRPC0.
Draw the short-run Phillips curve. Label it SRPC0.
Draw a point at the natural unemployment rate and the expected inflation rate. Label it 1.

Now the natural unemployment rate rises to 9 percent with no change in the expected inflation rate.

Draw and label LRPC1.
Draw and label SRPC1.
Draw a point at the natural unemployment rate and the expected inflation rate. Label it 2.

answer

https://o.quizlet.com/4plYWbHdFk680Blr594F.g_b.png

question

Deflation is _______.

answer

a persistently falling price level.

question

Choose the statement that is incorrect:

A. A one-time fall in the price level occurs either because aggregate demand decreases or because short-run aggregate supply increases.

B. A one-time fall in the price level occurs when there is an increase in capital that increases potential GDP.

C. In a deflation, the inflation rate is positive but decreasing in consequent years.

D. In a deflation, the price level persistently falls.

answer

C. In a deflation, the inflation rate is positive but decreasing in consequent years.

question

Deflation occurs when _______.

answer

aggregate demand increases at a persistently slower rate than aggregate supply.

question

The consequences of deflation include all of the following except _______.

A. falling real wage rates for workers with long-term wage contracts
B. a decrease in real GDP and employment
C. employers hire fewer workers
D. redistribution of income and wealth

answer

A. falling real wage rates for workers with long-term wage contracts.

question

An increase in income taxes _______, everything else remaining the same.

answer

makes the multiplier smaller

question

The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.

To calculate the multiplier, we divide ______ by ______.

answer

autonomous; the change in equilibrium expenditure and real GDP.

the change in equilibrium expenditure; the change in autonomous expenditure.

question

The graph shows an economy that has no taxes or imports.

AD0 is the aggregate demand curve when investment is $1.0 trillion, and AD1 is the aggregate demand curve when investment is $1.5 trillion.

What is the size of the multiplier in the short run? LOOK AT THE IMAGE ADDRESS: https://o.quizlet.com/aD4Lkjz8JsTxsVeZfIksfQ_b.png

The size of the multiplier in the short run is ______.

answer

question

The multiplier is the amount by which the change in ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP.

For every dollar increase in ______ expenditure, the multiplier determines the increase in real GDP.

answer

autonomous; autonomous

question

The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to ______.

answer

increase real GDP by a given amount

question

The multiplier increases when the marginal propensity to consume ________________.

answer

increases.

question

The multiplier increases when the marginal propensity to import _______________ or the income tax rate _______________.

answer

decreases; decreases.

question

How can the change in U.S. wealth differ from U.S. saving?

answer

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

question

In 2012, the Lee family had disposable income of
$70,000, wealth of $140,000, and an expected future income of $70,000 a year.
At a real interest rate of 22 percent a year, the Lee family saves $10,000 a year; at a real interest rate of 44 percent a year, they save $15,000 a year; and at a real interest rate of 66 percent, they save $20,000 a year.

Draw a point to show the quantity of loanable funds supplied by the Lee family when the real interest rate is
1) 2 percent a year. Label it 1.

2) 4 percent a year. Label it 2.

3) 6 percent a year. Label it 3.
Draw the Lee family's supply of loanable funds curve through the points. Label it.

answer

https://o.quizlet.com/Vr0Z09ks00lEKFmnTrXKww_b.png

question

In 2012, the Lee family had a disposable income of
$70,000, wealth of $280,000, and an expected future income of $70,000 a year.
The graph shows the Lee family's supply of loanable funds curve.
In 2013, suppose the stock market crashescrashes and default risk increasesincreases.
Draw a new curve to show the effect of the change in default risk on the Lee family's supply of loanable funds curve. Label it.

answer

https://o.quizlet.com/eUxhFu-VVLn5XzlkU4PMng_b.png

question

Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and an even larger decrease in the supply of loanable funds.

Draw a demand for loanable funds curve. Label it DLF0.
Draw a supply of loanable funds curve. Label it SLF0.
Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1.

Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF1.
Draw a curve that shows an even larger decrease in the supply of loanable funds. Label it SLF1.
Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.

answer

https://o.quizlet.com/RIWDG6eAcBibqlEfwzdRsA_b.png

question

The graph shows demand for loanable funds curve.

Suppose the real interest rate rises.

Draw either an arrow along the demand curve showing the direction of change or a new demand curve.

answer

https://o.quizlet.com/DR.CiJjq2X6jewYudGQ2eA_b.png

question

This question goes with the graph before:
When the real interest rate rises, the ______ because the ______ is the opportunity cost of loanable funds.

answer

quantity of loanable funds demanded decreases;
real interest rate

question

An increase in households' expected future disposable income occurs.

Draw a curve that shows the effect of this event.

Draw a point at the new equilibrium quantity of loanable funds and the new equilibrium real interest rate.

answer

https://o.quizlet.com/LhR01XkgzDtBFUPnVpB44A_b.png

question

This question goes with the graph before:
Over time, on average the demand for loanable funds ______, so the real interest rate ______.

answer

and the supply of loanable funds increase at a similar pace; has no trend

question

An increase in current income taxes ______ the supply of loanable funds today because it ______.

An increase in expected future income ______.

answer

decreases; decreases disposable income, which decreases saving.

decreases the supply of loanable funds today because households with larger expected future income will save less today

question

The graph shows the loanable funds market.

During the 1990s, the invention and use of fiber-optic technologies required billions of dollars to be spent laying new cables under the oceans and launching communications satellites.

Draw a curve that shows the effect of this event. Label it.

Draw a point to show the new equilibrium quantity of loanable funds and real interest rate.

answer

https://o.quizlet.com/M3GttzJwjLSM3brlyo44dw_b.png

question

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit.

Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1.

Now suppose that the government has a budget surplus of $1 trillion.

Draw a curve that shows the effect of this surplus in the loanable funds market. Label it.

Draw a point at the new equilibrium real interest rate and quantity of investment. Label it 2.

Draw a point to show private saving when the government budget surplus is $1 trillion. Label it 3.

answer

https://o.quizlet.com/TdILzUQkA-L1nyF1plVtOA_b.png

question

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit.

Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1.

Now suppose that the government has a budget deficit of $1 trillion.

Draw a curve that shows the effect of this deficit in the loanable funds market. Label it.

Draw a point at the new equilibrium real interest rate and quantity of saving. Label it 2.

Draw a point to show investment when the government budget deficit is $1 trillion. Label it 3.

answer

https://o.quizlet.com/MP3vLKeKc39queIkppOLtg_b.png

question

A government budget surplus occurs, which increases the ______________ ____ loanable funds.

The real interest rate ______, household saving ______,

answer

supply of

falls; decreases and investment increases

question

A government budget deficit occurs, which ______.
The real interest rate ______.

Private saving ____________ and investment ____________.

answer

increases the demand for loanable funds;
rises.

increases, decreases.

question

Physical capital is ______. Financial capital is ______.

Examples of physical capital are ______.
Examples of financial capital are ______.

answer

the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services;

the funds that firms use to buy physical capital.

ovens used by Pizza Hut and lawn mowers used by Larry's Mowing;

bonds issued by Wal-Mart and stocks issued by Boeing.

question

The three main types of markets for financial capital are _______.

answer

loan markets, bond markets, and stock markets

question

Quote: "The G-20 aims to take stock of the economic recovery. One achievement in Pittsburgh could be a deal to require that financial institutions hold more capital."

Questions:
The "capital" referred to in the news clip is ______.

The financial institutions that the G-20 might require to hold more capital are ______.

The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed funds, a financial institution ______.

answer

the institutions' own funds;
banks and insurance companies

decreases its risk of insolvency.

question

A mortgage is _______.

answer

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)

question

What are commercial banks?

answer

Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.

question

Choose the statement that is incorrect:

A. financial institution is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what it has borrowed than its available cash.

B. If a financial institution's net worth is positive, the institution must be solvent and liquid.

C. A financial institution can be solvent but illiquid.

D. A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed.

answer

B. If a financial institution's net worth is positive, the institution must be solvent and liquid.

question

What are the three sources of global investment funds?

answer

household saving, govt. budget surplus, and borrowing from the rest of the world.

question

Based on the this link of a data table: https://o.quizlet.com/-sDYhR9W4V2PpvdxfNhg6A_b.png

In August 2017, the real interest rate was _____ %.
[AND]
Between April 2017 and August 2017, the real interest rate _____________.

answer

1.7% [AND] increased

1 of 136

question

answer

1. False
2. False
3. False
4. True

question

Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal policy?

answer

making the initial budget proposal in February

question

answer

decrease government expenditure.

question

Which components of government outlays and receipts contributed most to the huge budget deficits in 2011 and 2012?

answer

government expenditure and transfer payments

question

The time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as:

answer

a recognition lag.

question

answer

Graph B, when Real GDP WITH policy is above Real GDP WITHOUT policy

question

One of the primary goals of most governments with regard to the economy is:

answer

full employment

question

Every time the federal government runs a budget deficit, the government must:

answer

borrow, which adds to the government debt.

question

Supply-side economics emphasizes the role that __________ play in the supply of output in the economy.

answer

taxes

question

Supply-side economists point to the Laffer curve as evidence that higher taxes:

answer

can lead to lower overall government revenues.

question

Which type of fiscal policy would cause the shift of the AD curve to the right to AD1?

answer

higher govt. spending

question

We would expect the tax multiplier to be __________ in absolute value than the government purchases multiplier.

answer

smaller

question

Which of these is an example of an automatic fiscal policy?

answer

an unemployment benefit program

question

__________ maintains that tax policy can either create or destroy incentives to work, save, and invest.

answer

Supply-side theory

question

In 2008, spending on Social Security, Medicare and Medicaid was less than 10% of the GDP. By 2030 this amount is expected to be around 17% of GDP. One government option to solve this problem is to:

answer

decrease benefits

question

Many economists believe that increases in government debt are not necessarily problematic if the funds are used:

answer

to build infrastructure

question

Which of these is the main reason for the long-run funding problems of Social Security?

answer

Demographic changes

question

Many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to:

answer

the presence of time lags.

question

Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.

answer

automatic fiscal policy

question

What shift in the aggregate demand curve best represents the impact of a decrease in government spending through the multiplier process?

answer

question

When the economy is in a recession, the government can:

answer

increase government purchases or decrease taxes in order to increase aggregate demand.

question

The decline in private expenditures that results from an increase in government borrowing is known as:

answer

crowding out.

question

Which of these are the largest sources of federal government revenues?

answer

Personal income taxes and Social Security taxes

question

Changes in tax rates impact the economy through:

answer

both aggregate demand and aggregate supply.

question

Which of the following statements about U.S. government receipts is CORRECT?

answer

Federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades.

question

The structural budget deficit or surplus:

answer

is measured as if the economy were at full employment.

question

If the federal government's expenditures are less than its revenue, there is a __________.

answer

budget surplus

question

A government that collects more in taxes than it spends experiences a:

answer

budget surplus

question

Budget deficits automatically __________ during recessions and __________ during expansions.

answer

increase, decrease

question

According to supply-side theory, fiscal policymakers can combat the impact of recessions by:

answer

lowering tax rates.

question

The largest and fastest growing category of federal expenditures is __________.

answer

transfer payments.

question

Most economists would __________ a balanced federal budget mandate.

answer

not be in favor of

question

A government that spends more than it collects in taxes experiences a:

answer

budget deficit

question

When the economy is at full employment, a cut in household taxes will __________.

answer

increase consumption.

question

The American Recovery and Reinvestment Act of 2009 is a clear example of:

answer

discretionary fiscal stimulus.

question

Which of these fiscal policy actions will increase real GDP in the short run?

answer

An increase in government expenditures

question

The government debt is best measured as the:

answer

sum of past budget deficits minus the sum of past budget surpluses.

question

What happens when government spending is greater than government tax revenues?

answer

There is borrowing by the government and the government debt rises.

question

Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

answer

Increasing income tax rates

question

Government policies that increase aggregate demand are called __________.

answer

fiscal stimulus

question

What is the budget balance when real GDP is $5 trillion?

The chart read that when the Real GDP is $5 trillion, the receipts were 0.3 and the Outlays were 0.3.

answer

0.0 trillion dollars

question

The tax wedge is the gap between the before-tax and after-tax ______.

answer

wage rates

question

answer

https://o.quizlet.com/zjXPk0fA44lyMEZ3tVRpvg_b.png

question

The structural surplus or deficit ______.

answer

is the budget balance that would occur if the economy were at full employment

question

The division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits, is the ______.

answer

generational imbalance

question

Draw a curve that shows the relationship between the tax rate and the amount of tax revenue collected.

answer

https://o.quizlet.com/FNBQLi0QXnaUvsJhD1VjNg_b.png

question

This question goes with the graph before:

The relationship between the tax rate and the amount of tax revenue collected is called the ______ curve.

This curve shows that ______.

answer

Laffer;
tax cuts can increase tax revenue

question

answer

https://o.quizlet.com/H64qr701XZcrz-GTVzYeeQ_b.png

question

This question goes with the graph before:

The quantity of investment and borrowing that firms plan to undertake depends on ______.

answer

how productive capital is and what it costs

question

answer

$1 million

question

answer

https://o.quizlet.com/WSV1SOwTygeHfu9vrtvSgQ_b.png

question

The cyclical surplus or deficit ______.

answer

is the actual surplus or deficit minus the structural surplus or deficit

question

Prior to the Great Depression, the purpose of the federal budget was to ______.

answer

finance federal govt programs and activities

question

answer

A. When full employment returns in 2018, the CBO says that the cyclical deficit will continue to be large.

question

A fall in real GDP that results in a decrease in personal income tax receipts is an example of ______.

answer

automatic fiscal policy

question

answer

D. The Demand-side effects of a tax cut are likely to be larger than an equivalent increase in govt. expenditure

question

When an economy is below full employment and the government has a budget deficit, that deficit ______.

answer

exceeds the structural deficit

question

answer

D. When real GDP decreases in a recession, the poor become poorer, but at the same time the rich become richer and tax revenues increase

question

When a tax is applied to labor income, the result is a ______ full-employment quantity of labor and a ______ potential GDP.

answer

Smaller; lower

question

The ______ is an amount of money that, if invested today, will grow to equal a given future amount when the interest that it earns is taken into account.

answer

present value

question

answer

https://o.quizlet.com/4N2cUkvJFe2ZszC40tJmBA_b.png

question

Fiscal imbalance is the ______ value of the government's commitments to pay benefits minus the ______ value of its tax revenues.

answer

present; present

question

answer

Statements 1 and 2

question

answer

deficit of $1 trillion; surplus of $4 trillion

question

The figure shows the labor market when an income tax is imposed.
The tax wedge is ______.

answer

$15/ hour

question

If a structural surplus exists but the government's budget is balanced, then ______.

answer

real GDP < Potential GDP

question

Fiscal policy attempts to achieve all of the following objectives except ______.

A. a stable money supply
B. sustained economic growth
C. full employment
D. price level stability

answer

A. a stable money supply

question

An accounting system that measures the lifetime tax burden and benefits of each generation is called ______.

answer

generational accounting

question

An increase in the income tax rate is an example of ______.

answer

discretionary fiscal policy

question

answer

B. An increase in govt. expenditure increases govt. borrowing (or decreases govt. lending if there is a budget surplus) and lowers the real interest rate.

question

answer

D. The true tax rate on interest income is lower than that on labor income because of the way in which inflation and taxes on interest income interact

question

answer

https://o.quizlet.com/3FYjYpl1oClPTUNDDy1u3A_b.png

question

When the government imposes a tax on labor income, ______ the production function occurs and potential GDP ______.

answer

a leftward movement along; decreases

question

Potential GDP is $10 trillion and actual real GDP is $8 trillion.
The economy has a structural deficit of $1.5 trillion and an actual deficit of $2 trillion.
The cyclical deficit is ______.

answer

$0.5 trillion

question

Expansionary fiscal policy when the economy is below full employment ______ aggregate demand and real GDP, and the price level ______.

answer

increases; rises

question

answer

https://o.quizlet.com/GPqKbcHUJcNPiQp5EkFH4g_b.png

question

answer

D. Tax cuts can increase tax revenue

question

answer

raise, raise, cut, cut

question

answer

D. Borrowing from the rest of the world as a source of loanable funds decrease during the late 1990s and 2000s

question

Tax revenues ______ during a recession.
Needs-tested spending ______ during an expansion.

answer

decrease, decreases

question

answer

$0.2 trillion

question

The _______ lag is the time it takes Congress to pass the laws needed to change taxes or spending.

answer

law-making

question

answer

falls below; rise.

question

answer

https://o.quizlet.com/kWgzSV7POFvaqCiiQX6xnQ_b.png

question

A cost-push rise in the price level can arise from an increase in _______.

answer

the money wage rate or money prices of raw materials.

question

An economy is at potential GDP when it experiences an increase in costs.
The economy experiences _______.

answer

stagflation.

question

A stagflation can turn into a cost-push inflation process when _______.

answer

the quantity of money persistently increases.

question

answer

https://o.quizlet.com/fLwH7hanTURwf8MV2SmPog_b.png

question

This question is from the graph before:
If inflation is expected, _______.

answer

neither a cost-push inflation nor a demand-pull inflation occur.

question

The best forecast available, which is based on all the relevant information is called _______.

answer

a rational expectation.

question

If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.

answer

a demand-pull rise in the price level.

question

answer

https://o.quizlet.com/JhUmc64lCSE49ENx4MggTQ_b.png

question

This question comes from the graph before:
A rise in the price of oil creates _______.

answer

a one-time cost-push rise in the price level

question

A stagflation can turn into a cost-push inflation process when _______.

answer

the quantity of money persistently increases.

question

answer

https://o.quizlet.com/lwUTsa9HbgG8y.wvTlE4Pg_b.png

question

This question is from the graph before:
Along the short-run Phillips curve, ______.

answer

the expected inflation rate and the natural unemployment rate are constant.

question

Along the long-run Phillips curve, _______.

answer

the unemployment rate is constant at the natural unemployment rate

question

answer

https://o.quizlet.com/jaiI4JqrURZ5y4FZkwzZ8Q_b.png

question

This question goes with the graph before:
A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand.

answer

up; unexpected

question

If the natural unemployment rate increases and the expected inflation rate remains constant, then ______.

answer

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward

question

answer

B. An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.

question

If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.

answer

the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift

question

answer

https://o.quizlet.com/4plYWbHdFk680Blr594F.g_b.png

question

Deflation is _______.

answer

a persistently falling price level.

question

answer

C. In a deflation, the inflation rate is positive but decreasing in consequent years.

question

Deflation occurs when _______.

answer

aggregate demand increases at a persistently slower rate than aggregate supply.

question

answer

A. falling real wage rates for workers with long-term wage contracts.

question

An increase in income taxes _______, everything else remaining the same.

answer

makes the multiplier smaller

question

The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.

To calculate the multiplier, we divide ______ by ______.

answer

autonomous; the change in equilibrium expenditure and real GDP.

the change in equilibrium expenditure; the change in autonomous expenditure.

question

answer

question

answer

autonomous; autonomous

question

The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to ______.

answer

increase real GDP by a given amount

question

The multiplier increases when the marginal propensity to consume ________________.

answer

increases.

question

The multiplier increases when the marginal propensity to import _______________ or the income tax rate _______________.

answer

decreases; decreases.

question

How can the change in U.S. wealth differ from U.S. saving?

answer

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

question

answer

https://o.quizlet.com/Vr0Z09ks00lEKFmnTrXKww_b.png

question

answer

https://o.quizlet.com/eUxhFu-VVLn5XzlkU4PMng_b.png

question

answer

https://o.quizlet.com/RIWDG6eAcBibqlEfwzdRsA_b.png

question

The graph shows demand for loanable funds curve.

Suppose the real interest rate rises.

Draw either an arrow along the demand curve showing the direction of change or a new demand curve.

answer

https://o.quizlet.com/DR.CiJjq2X6jewYudGQ2eA_b.png

question

This question goes with the graph before:
When the real interest rate rises, the ______ because the ______ is the opportunity cost of loanable funds.

answer

quantity of loanable funds demanded decreases;
real interest rate

question

answer

https://o.quizlet.com/LhR01XkgzDtBFUPnVpB44A_b.png

question

This question goes with the graph before:
Over time, on average the demand for loanable funds ______, so the real interest rate ______.

answer

and the supply of loanable funds increase at a similar pace; has no trend

question

An increase in current income taxes ______ the supply of loanable funds today because it ______.

An increase in expected future income ______.

answer

decreases; decreases disposable income, which decreases saving.

decreases the supply of loanable funds today because households with larger expected future income will save less today

question

answer

https://o.quizlet.com/M3GttzJwjLSM3brlyo44dw_b.png

question

answer

https://o.quizlet.com/TdILzUQkA-L1nyF1plVtOA_b.png

question

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit.

Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1.

Now suppose that the government has a budget deficit of $1 trillion.

Draw a curve that shows the effect of this deficit in the loanable funds market. Label it.

Draw a point at the new equilibrium real interest rate and quantity of saving. Label it 2.

Draw a point to show investment when the government budget deficit is $1 trillion. Label it 3.

answer

https://o.quizlet.com/MP3vLKeKc39queIkppOLtg_b.png

question

A government budget surplus occurs, which increases the ______________ ____ loanable funds.

The real interest rate ______, household saving ______,

answer

supply of

falls; decreases and investment increases

question

A government budget deficit occurs, which ______.
The real interest rate ______.

Private saving ____________ and investment ____________.

answer

increases the demand for loanable funds;
rises.

increases, decreases.

question

Physical capital is ______. Financial capital is ______.

Examples of physical capital are ______.
Examples of financial capital are ______.

answer

question

The three main types of markets for financial capital are _______.

answer

loan markets, bond markets, and stock markets

question

answer

the institutions' own funds;
banks and insurance companies

decreases its risk of insolvency.

question

A mortgage is _______.

answer

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)

question

What are commercial banks?

answer

Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.

question

answer

B. If a financial institution's net worth is positive, the institution must be solvent and liquid.

question

What are the three sources of global investment funds?

answer

household saving, govt. budget surplus, and borrowing from the rest of the world.

question

answer

1.7% [AND] increased

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order

Christina’s Quizlet

Order an Essay Now & Get These Features For Free: