Chapter 11

Question 1

Crowding out results in a decrease in

Answer 1

Private spending

Question 2

The AD curve shifts to the right with a _______ in government purchases or a _______ in taxes

Answer 2

rise; fall

Question 3

If an individual pays an additional $0.30 in taxes as a result of a $1.00 increase in income, that individual has a ________ tax rate of 30 percent

Answer 3

Marginal

Question 4

A curve showing the relationship between tax rates and tax revenues is called a ________ curve

Answer 4

Laffer

Question 5

An example of expansionary fiscal policy is

Answer 5

Increasing government purchases and decreasing taxes

Question 6

Contractionary fiscal policy actions include

Answer 6

Decreasing government spending and increasing taxes

Question 7

To eliminate a recessionary gap, Keynesian theory indicates that government should

Answer 7

Decrease taxes or increase government purchases

Question 8

To eliminate an inflationary gap, Keynesian theory indicates that’s government should

Answer 8

Increase taxes or decrease government purchases

Question 9

When congress decreases income taxes, this is an example of

Answer 9

Expansionary fiscal policy