When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

When GDP and incomes are high the government collects more dollars in tax revenue. When they're low, the government collects fewer tax dollars. These higher and lower amounts help even out the economy without having to wait for changes in tax rates or other legal matters For these reasons, tax revenues (not rates) are best described as O monetary policy the marginal propensity to consume O automatic stabilizers O contractionary fiscal policy

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 5P

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Similar questions

Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
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?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy Is producing more than potential GDP.
What are some of the ways fiscal policy might encourage economic growth?
Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?
During the Great Recession of 20082009, what actions would have been required of Congress and the President had a balanced budget amendment to the Constitution been ratified? What impact would that have had on the unemployment rate?
Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: A recession. A stock market collapse that hurts consumer and business confidence. Extremely rapid growth of exports. Rising inflation. A rise in the natural rate of unemployment. A rise in oil prices.