Chapter 11

Question 1

Expansionary policy : ___________ government policy or _____________ taxes

Answer 1

Increase govt spending

Decrease taxes

Question 2

Type of policy in an inflationary gap?

Answer 2

Contractionary policy

Question 3

Contractionary policy: ___________ government spending, ____________ taxes

Answer 3

Decrease govt spending

Increase taxes

Question 4

Crowding out effect

Answer 4

Govt wants you to spend

Question 5

Complete crowding out

Answer 5

Saving all of your extra money (totally ineffective)

Question 6

Type of policy in a recessionary gap?

Answer 6

Expansionary policy

Question 7

Budget deficit

Answer 7

Govt > tax revenue

Question 8

Budget surplus

Answer 8

Tax revenue > govt spending

Question 9

Fiscal policy

Answer 9

Changes in govt expenditures or taxes to achieve economic growth

Question 10

Marginal tax rate

Answer 10

Change in tax payment / change in taxable income

Question 11

Zero crowding out

Answer 11

Effective

Question 12

Zero crowding out : private sector receives more money today bc

Answer 12

Of the reduction in taxes and they won’t save this extra money

Question 13

Complete crowding out

Answer 13

Totally ineffective

Expansionary fiscal policy

Question 14

If govt increases tax rate, tax revenue

Answer 14

Decreases