34. Discretionary fiscal policy refers to A) deliberate government efforts to stabilize the economy through government spending and taxes. B) the use of automatic stabilizers and intervention policies to stabilize the economy. C) any government policy that requires a lag period of at least three months. D) the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy. 35. An inflationary gap can be closed with A) using an expansionary monetary policy. B) using a policy action such as a reduction in taxes. C) using a policy action such as a reduction in government purchases. D) imposing price controls to prevent prices from rising. 36. The term “crowding out” refers to the phenomenon that occurs when increased government spending A) raises the price level and reduces consumption. B) leads to higher interest rates which reduces private investments. C) leads to higher bond prices which decreases the demand for Treasury bonds. D) leads to increased budget deficits that ultimately warrant increases in income taxes.

34. Discretionary fiscal policy refers to A) deliberate government efforts to stabilize the economy through government spending and taxes. B) the use of automatic stabilizers and intervention policies to stabilize the economy. C) any government policy that requires a lag period of at least three months. D) the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy. 35. An inflationary gap can be closed with A) using an expansionary monetary policy. B) using a policy action such as a reduction in taxes. C) using a policy action such as a reduction in government purchases. D) imposing price controls to prevent prices from rising. 36. The term “crowding out” refers to the phenomenon that occurs when increased government spending A) raises the price level and reduces consumption. B) leads to higher interest rates which reduces private investments. C) leads to higher bond prices which decreases the demand for Treasury bonds. D) leads to increased budget deficits that ultimately warrant increases in income taxes.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 1SQP

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The economy is experiencing rapid inflation, pushing above 9%. Which fiscal policy action should the government implement in an attempt to fix this problem? A.) decrease interest rates B.) raise taxes C.) increase spending D.) increase reserve requirements
10. In order to close an inflationary gap, the government needs to implement which of the following measures A. expansionary fiscal policy B. contractionary fiscal policy C. expansionary monetary policy D. contractionary monetary policy
1. Use of discretionary policy to stabilize the economy In an effort to stabilize the economy, is it best for policymarkers to use monetary policy, fiscal policy, or a combination of both? The following questions address the ways monetary and fiscal policies impact the economy and the pros and cons associated with using these tools to ease economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the economy in January 2025. According to the graph, this economy is in .To bring the economy back to the natural level of output, the government could use monetary or fiscal policy such as Shift the appropriate curve on the following graph to illustrate the effects of the policy you chose. 150 LRAS AS 110 X AD 70 24 26 OUTPUT (Trillions of dollars) PRICE LEVEL 130 85 50 20 22 28 30 AD ロー AS ? Suppose that in January 2025, policymakers undertake the type of policy that is…
QUESTION 5 05. The "crowding-out secondary effect expansionary macroeconomic policy a) For fiscal policy it is about government borrowing to finance the government budget deficit, associated with expansionary fiscal policy. This increased government borrowing tends to increase the market rate of interest, which dampens investment spending. b) For monetary policy it is about the expansion of the economy increasing the demand for money to service the increased volume of transactions. This tends to increase the market rate of interest, which dampens investment spending. c) Decreases the autonomous spending multiplier and thus the impact of expansionary policy. d) All of the above.
BQ.1.2Distinguish between monetary and fiscal policy.
An economy is operating with output $50,000,000 below the natural rate of output. Fiscal policy makers want to close this recessionary gap. The central bank agrees to adjust the money supply to keep the interest rate constant, so there will be no crowding out. The marginal propensity to consume is 0.75, and the price level is completely fixed in the short run. 3. How much would government spending need to increase (use a negative number if it needs to decrease) to restore the economy to full employment? 4. How much would taxes need to increase (use a negative number if it needs to decrease) to restore the economy to full employment?
a. Which of the following are considered limitations of fiscal policy? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? implementation lag ? unemployment lag ? recognition lag ? liquidity lag ? legislative lag b. Which of the following are considered limitations of monetary policy? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? unemployment lag ? implementation lag ? recognition lag ?liquidity lag ? legislative lag
QUESTION 3 Match the following terms with their definitions. Recognition Lag Policy Lag Implementation Lag Impact Lag Discretionary Macroeconomic Policy Automatic Stabilizers Fiscal Policy…
True or False and why? 6. Fiscal policies tend to be automatic as a result of legislation. 7. Taxes always act as automatic stabilizers. 8. Contractionary monetary policies result to lower investment spending and higher incomes. 9. Inflation targeting is a mandate exclusive to the Bangko Sentral ng Pilipinas. 10. Expansionary monetary policies result to an increase in real GDP.
Q) Which statement below is true of ONLY fiscal policy? Uses government expenditures to create demand Increases the availability of money Used to alter AD A policy typically set by a banking authority Explain it early and correctly.choose correct option but not copy paste anything
Identify one fiscal policy action that could counter the increase in investments. Explain how this policy will affect each of the following.i. Output ii. The price level iii. Nominal interest rates
The Government of Bangladesh opted for expansionary fiscal policy to fight economic depression. Identify the type of inflation it is expected to create and its impact on the wages. Illustrate the process on the graph. Assume the Pakistan’s economy is in recession: Pakistan implements a combination of expansionary fiscal and monetary policy. In the absence of complete crowding out what will be the effect of these policies on each of the following:(i) Aggregate demand in Pakistan(ii) The price level in Pakistan(iii) Interest rates in Pakistan

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34.	Discretionary fiscal policy refers to
	A)	deliberate government efforts to stabilize the economy through government spending and taxes.
	B)	the use of automatic stabilizers and intervention policies to stabilize the economy.
	C)	any government policy that requires a lag period of at least three months.
	D)	the deliberate use of government spending and taxes to complement the effects of monetary policy in an effort to stabilize the economy.

35.	An inflationary gap can be closed with
	A)	using an expansionary monetary policy.
	B)	using a policy action such as a reduction in taxes.
	C)	using a policy action such as a reduction in government purchases.
	D)	imposing price controls to prevent prices from rising.

36.	The term “crowding out” refers to the phenomenon that occurs when increased government spending
	A)	raises the price level and reduces consumption.
	B)	leads to higher interest rates which reduces private investments.
	C)	leads to higher bond prices which decreases the demand for Treasury bonds.
	D)	leads to increased budget deficits that ultimately warrant increases in income taxes.