6. A reduction in government expenditure or an increase in taxes is defined as: 1. expansionary monetary policy. 2. contractionary fiscal policy. 3. expansionary fiscal policy. 4. contractionary monetary policy.

6. A reduction in government expenditure or an increase in taxes is defined as: 1. expansionary monetary policy. 2. contractionary fiscal policy. 3. expansionary fiscal policy. 4. contractionary monetary policy.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 38CTQ: Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending...

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Question

6.
A reduction in government expenditure
or an increase in taxes is defined as:
1. expansionary monetary policy.
2. contractionary fiscal policy.
3. expansionary fiscal policy.
4. contractionary monetary policy.

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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?
In a recession, does the actual budget surplus or deficit fall above or below the standardized employment budget?
Give some examples of changes in federal spending and taxes by the government that would be fiscal policy and some that would not.
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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. 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?
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 stance refers to: Select one: A. A government that takes a tough stance when it comes to running the country’s finances B. A government that is running a budget deficit C. A government that is running a budget surplus D. Whether a government is pursuing an expansionary or contractionary fiscal policy
7. Non-discretionary fiscal policy designed to counteract a reduction in aggregate demand might include A. an increase in the money stock. B. a return to the gold standard. C. increased government spending on unemployment benefits. D. all of the options are correct.
1. The cyclically adjusted surplus as a percentage of GDP is 1 percent in year 1. This surplus becomes 2 percent of GDP in year 2. It can be concluded from year 1 to year 2 that: a. fiscal policywas expansionary- b. Fiscal policy was contractionary c. The federal government is increasing its spending d. The federal government is decreasing taxes
Part A Decide whether each of the following fiscal policies of the federal government is expansionary or contractionary. Write expansionary or contractionary, and explain the reasons for your choice. 1. The government cuts business and personal income taxes and increases its own spending. Expansionary. The decrease in personal income taxes increases disposable income and thus increases consumption spending. The business tax cut increases investment spending, and the increase in government spending increases government demand. 2. The government increases the personal income tax , Social Security tax and corporate income tax Government spending stays the same 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses Other government spending remains the same