Ch 15/16 Federal Budgets and Fiscal Policy

Question 1

By 1918, the top marginal income tax rate in the U.S. rose to:

Answer 1

77%

Question 2

According to the textbook, the country with the highest debt-to-GDP ration in the world, in terms of publicly held debt, is:

Answer 2

Japan

Question 3

Which country holds the most U.S. debt?

Answer 3

United States

Question 4

The goal of expansionary fiscal policy is to shift the ______ curve to the _______.

Answer 4

AD; right

Question 5

The goal of contractionary fiscal policy is to shift the _____ curve to the _____.

Answer 5

AD; left

Question 6

Marginal Propensity to Consume Formula

Answer 6

MPC = ΔC/ΔY

Question 7

The spending multiplier is:

Answer 7

a formula to determine the total impact on spending from an initial change of a given amount

Question 8

Spending Multiplier Formula

Answer 8

m=(1)/(1-MPC)

Question 9

Three issues that arise in the application of activist fiscal policy are:

Answer 9

time lags, crowding out, and savings shifts

Question 10

Impact lag happens because:

Answer 10

it takes time for the complete effects of monetary and fiscal policy to materialize.

Question 11

Unemployment compensation is an example of:

Answer 11

an automatic stabilizer.

Question 12

Supply-side fiscal policy will lead to:

Answer 12

a rightward shift of the LRAS.

Question 13

Supply-side policy involves the use of:

Answer 13

government spending and taxes to affect the production side of the economy.

Question 14

What fiscal policy initiative focuses on the supply-side of the economy?

Answer 14

Lower marginal income revenues.

Question 15

At _______ tax rates, _______ in those tax rates lead to _______ in total tax revenue.

Answer 15

low; increases;increases

Question 16

The Laffer curve is:

Answer 16

an illustration of the relationship between tax rates and tax revenues.