Fiscal Policy

Question 1

Types of Fiscal Policy Lag

Answer 1

Recognition LAG which is to find out what the problem is?

Administration LAG: formulating the policy

Operational Lag: putting it into action

Question 2

Types of Fiscal Policy

Answer 2

Expansionary (recession): govt. increase spending or reduce taxes or both ; budget moves to deficit

Contractionary (peak on roids): govt. spending decrease or increase tax or both ; budget moves to surplus

Question 3

Automatic

Answer 3

existing laws
taxes because incomes go up
unemployment insurgence

Question 4

Discretionary

Answer 4

debate about govt. spending

Question 5

Spending (G)

Answer 5

1/(1-MPC)

Question 6

Tax

Answer 6

(-MPC)/(1-MPC)

Question 7

Crowding Out

Answer 7

The government borrows to much to spend with an aggressive expansionary fiscal policy so the bank increases interest rates so then people borrow less so I goes down.

i up
X (exports) down
Money value up

Question 8

Taxes and Keynesian model

Answer 8

Govt have to help regulate economy
Wages and prices are sticky
So the ratchet up there
Spending trumps taxes

Question 9

Fiscal Policy

Answer 9

Government ability to manipulate the economy

Question 10

Appreciation / Depreciation of the Dollar``

Answer 10

If appreciation then exports decrease
Money value increase due to higher interest rate
If country has less value they will have more exports cuz its cheaper

Question 11

MPC

Answer 11

change in consumption over change in income