Terms : Hide Images
| 6802854182 | fiscal policy | Congress and the President influence the economy through changes in SPENDING and TAXES | 0 | |
| 6802854183 | deficit | the amount of excess expenditures over revenues at one time/within one year | 1 | |
| 6802854184 | transfers in kind | transfers that substitute money (food stamps) | 2 | |
| 6802854185 | progressive taxes | the more money you earn, the greater the percentage of your income you pay in taxes -ex: federal income tax | 3 | |
| 6802854186 | proportional taxes | flat tax. all incomes are taxes at the same percentage | 4 | |
| 6802854187 | merit goods | -people have a right to them -there are positive externalities -role of the government to provide them | 5 | |
| 6802854188 | Social Security | -taxes covered by the Federal Insurance Contributions Act (FICA) -2nd largest source of federal revenue -income for retirees, survivors, etc -regressive -employers (indirect) -employees (direct) | 6 | |
| 6802854189 | net export effect | A higher price level increases the relative price of domestic exports to other countries while decreasing the relative price of foreign imports from other countries. This results in a decrease in exports and an increase in imports and thus a decrease in net exports. |  | 7 |
| 6802854190 | crowding out effect | A situation when increased interest rates lead to a reduction in private investment spending such that it dampens the initial increase of total investment spending is called crowding out effect. |  | 8 |
| 6802854191 | automatic stabilizers | Automatic stabilizers offset fluctuations in economic activity without direct intervention by policymakers. When incomes are high, tax liabilities rise and eligibility for government benefits falls, without any change in the tax code or other legislation. When incomes slip, tax liabilities drop and more families become eligible for government transfer programs, such as food stamps and unemployment insurance that help buttress their income. | 9 | |
| 6802854192 | debt | the total of how much owed, the government borrows by selling US treasury bonds | 10 | |
| 6802854193 | transfer payments | government actually giving you money (welfare, social security) | 11 | |
| 6802854194 | regressive taxes | the less money you earn, the greater the percentage of your income you pay in taxes | 12 | |
| 6802854195 | demerit goods | -goods that have negative externalities (cigarettes, alcohol) -role of the government to regulate demerit goods | 13 | |
| 6802854196 | What are the different types of taxes? | -proportional (flat) tax -progressive tax -regressive tax | 14 | |
| 6802854197 | Which types of taxes do federal and state governments use to generate revenue? | -personal income tax (largest source of federal income, direct, progressive) -corporate income tax (progressive, indirect) | 15 | |
| 6802854198 | How can the government act to help fight inflation? | Contractionary Fiscal Policy -decrease government spending -increase taxes | 16 | |
| 6802854199 | What is the difference between expansionary fiscal policy and contractionary fiscal policy? | Expansionary = used when AD is too low (recession) Contractionary = used when AD is too high (inflation) | 17 | |
| 6802854200 | What is the difference between automatic and discretionary fiscal policy? | Discretionary = government actively does something to change G or T Automatic = G or T change without any NEW government action | 18 | |
| 6802854201 | sales tax | regressive, indirect | 19 | |
| 6802854202 | excise tax | tax paid on specific goods, regressive, indirect | 20 | |
| 6802854203 | property tax | regressive landlords (indirect) homeowner (direct) | 21 | |
| 6802854204 | estate (death) tax | federal tax on the property of someone who has dies progressive, direct | 22 | |
| 6802854205 | tax of gifts | progressive, direct | 23 | |
| 6802854206 | How can the government act to help fight unemployment? | Expansionary Fiscal Policy -increase government spending -decrease taxes | 24 | |
| 6802854207 | Recessionary Gap | when GDP < Full Employment GDP | 25 | |
| 6802854208 | Inflationary Gap | when GDP > Full Employment GDP | 26 | |
| 6802854209 | Lags in Fiscal Policy | -the impacts of spending and tax changes are not immediate -if the economy self-corrects before the policy effects kicks in, they can cause problems -natural correction + fiscal policy = over correction | 27 | |
| 6802854210 | Which of the following taxes is generally progressive in the U.S.? -corporate income -social security -sales -excise | corporate income | 28 | |
| 6802854211 | Which of these would qualify as an example of discretionary fiscal policy? -during a recession, more unemployment checks are sent -in a moment of high inflation, more taxes are collected -in a time of recession, Congress passes a tax cut -in a time of high inflation, less is spent on Medicare | -in a time of recession, Congress passes a tax cut | 29 | |
| 6802854212 | What is the likely result of an increase in government borrowing? | an increase in interest rates | 30 | |
| 6802854213 | When GDP drops, what is likely to occur to the federal budget? Deficit or Surplus | Deficit | 31 | |
| 6802854214 | The government opts to increase spending by $100. MPC is 0.8. To maintain current employment: | taxes must be raised by $125 | 32 | |
| 6802854215 | Spending Multiplier | change in GDP = multiplier x initial change in spending multiplier = 1/MPS or (1-MPC) | 33 | |
| 6802854216 | Tax Multiplier | change in GDP = tax multiplier x change in taxes tax multiplier = -MPC/MPS | 34 | |
| 6802854217 | Which of the following is not an automatic stabilizer? -tax cut during recession -unemployment benefits -progressive income tax system -food stamps | -tax cut during recession | 35 | |
| 6802854218 | Federal budget deficits always occur when | spending is greater than revenue | 36 | |
| 6802854219 | Expansionary fiscal policy will generally have what effect on price levels in the economy? | price levels will rise | 37 | |
| 6802854220 | To address an inflationary gap, all of the following would help except: -a reduction in exports -decrease in consumer spending -cuts in government spending -tax cuts | tax cuts | 38 | |
| 6802854221 | Decreasing taxes and increasing government spending will likely have what effect? | unemployment falls | 39 | |
| 6802854222 | Which of the following would reduce absolute value of the tax multiplier? | drop in MPC | 40 | |
| 6802854223 | If MPC is 0.75 and taxes go up $5 million, which will be the likely effect on the economy? | GDP will fall $15 million | 41 | |
| 6802854224 | If the government adjusts fiscal policies in such a way as to add to the deficit, | we would expect GDP to rise | 42 | |
| 6802854225 | Which type of tax generates the most revenue for the federal government? | personal income | 43 | |
| 6802854226 | Approximately what level of inflation does the government aim to maintain? | 1-2% | 44 | |
| 6802854227 | Why might the government refrain from using fiscal policy to address an inflationary gap? | concerns about the lag effect | 45 | |
| 6802854228 | Expansionary fiscal policy will most likely cause interest rates and investment to change in which of the following ways in the short run? | increase interest rates decrease investment | 46 | |
| 6802854229 | Total spending in the economy is most likely to decrease by the largest amount if which of the following happens to government spending and taxes? | decrease spending increase taxes | 47 | |
| 6802854230 | the crowding out effect suggest that | the reduction in private spending resulting from higher interest rates cause by a budget deficit will partially offset the expansionary impact of an increase in government spending | 48 | |
| 6802854231 | automatic stabilizers in government policy are less effective when | taxes are regressive | 49 | |
| 6802854232 | in order to be called an automatic stabilizer, which of the following must taxes automatically do in a recessionary period and in an inflationary period? | decrease recessionary increase inflationary | 50 | |
| 6802854233 | personal income tax | progressive, direct | 51 |
