If additional dollars of public spending (G) are exactly matched by additional dollars of taxation (T)...
If additional dollars of public spending (G) are exactly matched by additional dollars of taxation (T) increases in a less than fully-employed economy, the effect is most likely to be:
A) Inflationary. B) Contractionary. C) Expansionary. D) None of the above.
Homework Answers
It should be option C
When government spending and taxes are increased by the same amount and there is recessionary gap in the economy so that it is less than fully employed, balanced budget multiplier starts working. Its value is one which means national income increases by the size of the government expenditure, which is an expansionary policy. Therefore it is likely to be expansionary.
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If additional dollars of public spending (G) are exactly matched
by additional dollars of taxation (T)...
a) Explain how automatic stabilizers work, both on the taxation side and on the spending side,...
a) 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. b) Do you think the typical time lag for fiscal policy is likely to be longer or shorter than the time lag for monetary policy? Explain your answer c) How would a balanced budget amendment change the...
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co...
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co decrease and government spending is unchanged a consumption and investment both increase b. consumption and investment both decrease c consumption increases and investment decreases d. consumption decreases and investment increases. 7. Suppose a business-friendly billionaire becomes president. As a result, businesses become optimistic about the future and more eager than before to increase their investment spending According to the classical long-run macroeconomic model of...
1. When the government increases spending by issuing more bonds, it causes: a) nations currency to...
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1. If the economy is at full employment, increases in government spending: A) have a multiplier...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
1. A cyclical deficit is the portion of the deficit that exists only when: the economy...
1. A cyclical deficit is the portion of the deficit that exists only when: the economy is at potential output/income the economy is in an inflationary gap the economy is in a recessionary gap The Treasury is buying back bonds 2. When the U.S. Government runs a deficit, the Fed has to buy bonds to finance the deficit Treasury has to sell bonds to finance the deficit Federal government tax revenues must be less than Federal government spending Both B...
Question 24 (0.67 points) C = 100+ 0.9 (Y-T) 1 = 1000 G= 200 NX =...
Question 24 (0.67 points) C = 100+ 0.9 (Y-T) 1 = 1000 G= 200 NX = - 100 T=50 Using the information above, if government officials increase G by 50 and increase taxes by 50, the equilibrium level of GDP will: (dollar amounts are in billions) a) be impacted, but we cannot determine the outcome due to conflicting spending patterns. b) increase by $50 billion since the impact of the change in G is stronger than the impact of the...
The graph shows an economy that is above full employment. To restore full employment, the government...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease 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 AD Draw a point at the full-employment equilibrium...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
hird de to Figure 3-13. One difference between F and is that Point G t able...
hird de to Figure 3-13. One difference between F and is that Point G t able with , but posts Arm are fully employed at polt bo moral pot More output can be produced at polut but no additional output can be produced d. This con produces more cookies al point than at pol F. 10. If production is given by Q - doubling both inputs (a) more than doables output (1) exactly doubles output (e) Increases output less than...
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co decrease and government spending is unchanged a consumption and investment both increase b. consumption and investment both decrease c consumption increases and investment decreases d. consumption decreases and investment increases. 7. Suppose a business-friendly billionaire becomes president. As a result, businesses become optimistic about the future and more eager than before to increase their investment spending According to the classical long-run macroeconomic model of...
1. If the economy is at full employment, increases in government spending: A) have a multiplier effect on equilibrium output. B) have no effect on the aggregate price level. C) are primarily absorbed by price increases. D) reduce aggregate output. 2. Which of the following measures is NOT an example of discretionary fiscal policy? A) The unemployment compensation program pays out more money as unemployment rates rise. B) Tax rates are increased in the hope of slowing down the rate...
Question 24 (0.67 points) C = 100+ 0.9 (Y-T) 1 = 1000 G= 200 NX = - 100 T=50 Using the information above, if government officials increase G by 50 and increase taxes by 50, the equilibrium level of GDP will: (dollar amounts are in billions) a) be impacted, but we cannot determine the outcome due to conflicting spending patterns. b) increase by $50 billion since the impact of the change in G is stronger than the impact of the...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease 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 AD Draw a point at the full-employment equilibrium...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
hird de to Figure 3-13. One difference between F and is that Point G t able with , but posts Arm are fully employed at polt bo moral pot More output can be produced at polut but no additional output can be produced d. This con produces more cookies al point than at pol F. 10. If production is given by Q - doubling both inputs (a) more than doables output (1) exactly doubles output (e) Increases output less than...
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