Chapter13 Flashcards
To address a situation in which there is a ——– gap and the economy is operating at less than long-run aggregate supply LRAS, the government can ———- it’s spending and thereby shift the aggregate demand curve to the right, causing equilibrium level of real GDP per year to increase.
Recessionary, increase
Fiscal policy is defined as making discretionary changes in government ——— or ———-to achieve such national goals as high employment or reduced inflation.
Expenditures, taxes
To address a situation where there is an ———- gap, the government can ———- it’s spending and cause the aggregate demand curve to shift to the left, which reduces the equilibrium level of real GDP per year.
Inflationary, decrease
Changes in taxes can have. Similar effects on the equilibrium rate of real GDP and the price level. A ——– in taxes can lead to an increase in the equilibrium level of real GDP per year. In contrast, if there is an inflationary gap, an ——— in taxes can decrease equilibrium real GDP.
Decrease, increase
——- ——- ——— occur when government spending competes with the private sector and is increased. A direct crowding -out effect may occur.
Direct expenditure offsets
The ——– ——— theorem holds that an increase in the government budget deficit has no effect on aggregate demand because individuals anticipate that their future taxes will increase and therefore save more today to pay for them.
Ricardian equivalence
Changes in marginal tax rates may cause ——— ——- effects if a reduction in marginal rates induces enough additional work, savings, and investing. Government receipts can actually increase . This is called ——– ——– economics.
Supply-side, supply-side
Indirect crowding occurs because of an interest rate effect in which government’s efforts to finance its deficit spending cause interstates to ———–’ thereby crowding out private investment and spending, particularly on cars and houses. This is called the crowding out effect.
Increase
