How will a contractionary fiscal policy affect a budget deficit? A.) Debts will decrease B.) No impact C.) Deficit will increase D.) Deficit will decrease
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How will a contractionary fiscal policy affect a budget deficit?
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A.)
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Debts will decrease |
|
B.)
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No impact |
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C.)
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Deficit will increase |
|
D.)
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Deficit will decrease |
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- 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?2. The U.S. economy is in recession and has a large recessionary gap. Describe what automatic fiscal policy might occur. Describe a fiscal stimulus that could be used that would not increase the budget deficit. A. What are the levels of employment and potential GDP in OilPatch, what is the real wage rate paid by employers, and what is the after-tax real wage rate received by workers?A. Calculate the levels of consumption and savings that occurs when the economy is in equilibrium. B. Computer the government budget deficit in this economy. C. If government spending in banana land increases by $1000 what is the amount of the increase in equilibrium output? D. If taxes in banana land decrease by $1000 what is the new equilibrium output in this economy? E. To keep the government budget balanced, of both government spending and taxes in banana land increase by $1000 what is the change in equilibrium income level?
- 4. Fiscal policy affects aggregate demand because: government spending is a category of aggregate demand. taxes affect corporate spending and so investment. taxes affect disposable income and so consumption. all of the above.Fiscal Policy) Was fiscal policy effective when the U.S. economy was experiencing stagflation during the 1970s? Why or why not?10. Describe the characteristics of fiscal policy from 2000 to 2018. a. From 2000 to 2004, fiscal policy was (expansionary, contractionary ). The cyclically adjusted budget was 1.1 percent in 2000 and moved to -3.2 percent in 2004. b. From 2004 to 2007, the fiscal policy turned ( expansionary, contractionary ) as the cyclically adjusted deficit fell from –3.2 percent of GDP to -1.2 percent of GDP. c. During the Great Recession From 2007 to 2009, fiscal policy was (expansionary, contractionary ). The cyclically adjusted budget was -1.2 percent in 2007 and moved to -7.3 percent in 2009. Note: In 2008, the U.S. Congress passed an (_e increase government spending. The $152 billion in spending came in the form of tax breaks for businesses and payments to individuals. This initial stimulus ( did, did not) have much effect because households saved a substantial portion of their government payments. In 2009 a significantly larger spending stimulus measure, called the American Recovery and…
- 2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $64 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 8 and the tax multiplier is 4. Economist B believes that the government spending muitiplier is 4 and the tax multiplier is 2. Compute the amount the govermment would have to increase spending to close the output gap according to each economist's belief. Then, for each scenario, compute the size of the tax cut that would achieve this same effect. Policy Options for Closing Output Gap Increase in Spending Таx Cut Spending Multiplier Tax Multiplier (Billions of dollars) (Billions of dollars) Economist A Economist B Economist C favors tax cuts over increases in government spending. This means that Economist C likely…Answer part D) Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes. Instructions: Round your responses to one decimal place. a. What will be the government’s deficit? $____billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $ ______ billion c. At a 3 percent rate of interest, how much interest will the government pay each year? $ ________ billion d. Add the interest payment to the government’s $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the (i) Deficit. $ _________ billion (ii) Amount of new debt (bonds) issued to finance the deficit in the second year. $ ________ billion (iii) Total debt at the end of the second year. $ __________ billion (iv) Debt service requirement. $ _______billion12. If the tax multiplier is -6 and taxes are reduced by $100 billion, output: (A) falls by $100 billion. (B) falls by $600 billion. (C) increases by $600 billion. (D) increases by $100 billion.
- 19. What is Fiscal Policy? Discuss types of Fiscal policies?12. What is the purpose of the following fiscal policies? a. Contractionary fiscal policy b. Expansionary fiscal policy TCA hift mand to the right14. If the tax multiplier is -6 and taxes are reduced by $100 billion, output:(A) falls by $100 billion. (B) falls by $600 billion. (C) increases by $600 billion.(D) increases by $100 billion.
