Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 18, Problem 5QP
To determine
Explain whether the statement is agreeable or not.
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If the objective of fiscal policy is to stabilize (achieve full-employment (potential) GDP and maintain price level stability (control inflation)) the economy and promote economic growth, then would an annually balanced budget be effective? Why or why not?
Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.
Compare and contrast the use of government spending changes versus tax changes as a means of influencing the course of the economy. Is one or the other preferable in specific situations? What would be the limitations of fiscal policy?
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Chapter 18 Solutions
Economics (MindTap Course List)
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- During a recession, the government decides to give an additional child tax credit to households of $500 per child on their income tax. Assuming this resulted in additional tax refunds for the households. How could this fiscal policy affect each household and the economy itself? Explain.arrow_forwardExplain how fiscal policy can be implemented if an economy is in the downswing of a business cycle.arrow_forwardWhich is considered expansionary fiscal policy? a)a tax increase for wealthy individuals b)an increase in national defense spending c)regulations raising emission standards on trucks d)an increase in the money supplyarrow_forward
- Which of the following is considered contractionary fiscal policy? A) Congress decreases the income tax rate. B) Congress decreases defense spending. C) Legislation removes a college tuition deduction from federal income taxes. D) The New Jersey legislature cuts highway spending to balance its budget.arrow_forwardBased on the Krugman text and your reader articles, what position do you take on the current fiscal policy debate of stimulus vs austerity? Be sure to include the current tight job markets, moderate-high inflation, and high-debt conditions in justifying your answer.arrow_forwardOutline the supply-side view of fiscal policy. How does this view differ from the various demand-side theories? Would a supply-side economist be more likely to favor a $500 tax credit or an equivalent reduction in marginal tax rates? Why?arrow_forward
- Consider a potential fiscal policy used to curb a recession. How could a consumer and business expectations about the future economy could hamper those plans?arrow_forwardI got this one wrong, could you tell me the correct one? thank youarrow_forwardIdentify one fiscal policy action that could counter the effects identified in part (a). Explain how this policy will affect each of the following. Output Employment The price levelarrow_forward
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