ECON 214 InQuizitive Assignment 9 solutions complete answers

ECON 214 InQuizitive Assignment 9 solutions complete answers 

 

Place in chronological order the lag phenomena associated with the use of fiscal policy to smooth business cycles.

 

What is the definition of supply-side fiscal policy?

 

Place the events in sequence to describe how crowding-out happens.

 

The figure shows a drop in aggregate demand that, without government action, will be followed by an increase in aggregate supply. Match each label from the figure to the corresponding description.

 

Identify each policy action as being focused on the demand side, the supply side, or both.

 

Assume the government has established countercyclical fiscal policies to reduce the severity of its economy’s business cycle fluctuations. Click on the periods during which a contractionary fiscal policy is in effect.

 

If the marginal propensity to consume is 0.80, what is the total implied increase in economic spending activity from a government stimulus of $100 billion?

 

Which policy tools are considered automatic stabilizers?

 

Assume the economy is currently producing at short-run equilibrium point A. In fear that the economy is expanding beyond its long-run capabilities, government officials decide to raise taxes. Click on the equilibrium point that results from this fiscal policy decision.

 

What are the causes of rising government budget deficits when expansionary fiscal policy is used during recessions?

 

What are some characteristics of supply-side fiscal policy?

 

Apply the correct label to each event.

 

What is the reasoning behind the multiplying effect of government spending?

 

Supply-side policy aims to shift the aggregate supply curve not just temporarily but permanently.

 

Government borrowing to fund economy-boosting projects is self-defeating, since crowding-out will completely cancel out the benefits of the policy.

 

Fill in the blanks to complete the passage about monetary policy and fiscal policy.

 

Monetary policy and fiscal policy are two different tools used by – to influence the economy. Monetary policy concerns using the national – to affect the economy, while fiscal policy uses – and expenditures in the government’s –.

 

Which of the following government actions would be considered fiscal policy decisions?

 

Classify each scenario according to the type of policy lag it illustrates.

 

Fiscal policy is usually intended to influence aggregate demand (AD) rather than short- or long-run aggregate supply (SRAS and LRAS, respectively).

 

What was the centerpiece action of the Economic Stimulus Act of 2008?

 

Fill in the blanks to complete the passage about the Laffer curve.

 

The Laffer curve models – as a function of a single –. In a progressive scheme, one has to look separately at the revenue from different segments of taxpayers, corresponding to different rates. The data in the table suggests that tax cuts in the early 1980s led to – revenue from lower-income taxpayers but – revenue from the highest-income taxpayers. This would mean that reductions in the – rate, at least, made fiscal sense.

 

Fill in the blanks to complete the passage about tax cuts during the Kennedy administration.

 

John F. Kennedy was endorsing – fiscal policy when he declared that lowering the top marginal income tax rate, then at –, would not only be expansionary but also lead to more government –.

 

Suppose the government has a balanced budget and wants to increase spending without changing tax rates. The government enters the loanable funds market to borrow $150 billion for economic stimulus spending. How much money is available for private investment after this action has shifted the demand curve as shown in the figure?

 

There are times when the government wants to slow down economic growth.

 

Fill in the blanks to complete the passage about fiscal policy during recessions.

 

Expansionary fiscal policy used during economic downturns inevitably leads to a budget –. Suppose the government responds to the downturn by increasing government spending by $250 billion, but keeps tax rates the same. In this scenario, the – will rise by – $250 billion. In a recession, – falls and – rises, which means tax revenues will – even if tax rates do not change.

 

Apply the correct description to each policy example.

 

Which of the following is the correct definition of the new classical critique of fiscal policy?

 

For each region of the Laffer curve, select the policy that will increase tax revenue. If no increase is possible, select that description.

 

Place the events in chronological order.

 

A worker gets a raise of $120 per month and quickly decides to spend $90 of the money on necessities and the occasional luxury, while putting the remaining $30 into retirement savings. Based on this decision, calculate the worker’s marginal propensity to consume, or MPC, as a decimal.