![]() ![]() food stamps -tax cut during recession Federal budget deficits always occur when spending is greater than revenue Expansionary fiscal policy will generally have what effect on price levels in the economy? price levels will rise To address an inflationary gap, all of the following would help except: Tax multiplier = -MPC/MPS Which of the following is not an automatic stabilizer? Multiplier = 1/MPS or (1-MPC) Tax Multiplier change in GDP = tax multiplier x change in taxes To maintain current employment: taxes must be raised by $125 Spending Multiplier change in GDP = multiplier x initial change in spending ![]() in a time of high inflation, less is spent on Medicare -in a time of recession, Congress passes a tax cut What is the likely result of an increase in government borrowing? an increase in interest rates When GDP drops, what is likely to occur to the federal budget?ĭeficit or Surplus Deficit The government opts to increase spending by $100. in a time of recession, Congress passes a tax cut in a moment of high inflation, more taxes are collected during a recession, more unemployment checks are sent excise corporate income Which of these would qualify as an example of discretionary fiscal policy? ![]() natural correction + fiscal policy = over correction Which of the following taxes is generally progressive in the U.S.? if the economy self-corrects before the policy effects kicks in, they can cause problems decrease taxes Recessionary Gap when GDP Full Employment GDP Lags in Fiscal Policy -the impacts of spending and tax changes are not immediate Progressive, direct tax of gifts progressive, direct How can the government act to help fight unemployment? Expansionary Fiscal Policy Homeowner (direct) estate (death) tax federal tax on the property of someone who has dies increase taxes What is the difference between expansionary fiscal policy and contractionary fiscal policy? Expansionary = used when AD is too low (recession)Ĭontractionary = used when AD is too high (inflation) What is the difference between automatic and discretionary fiscal policy? Discretionary = government actively does something to change G or TĪutomatic = G or T change without any NEW government action sales tax regressive, indirect excise tax tax paid on specific goods, regressive, indirect property tax regressive corporate income tax (progressive, indirect) How can the government act to help fight inflation? Contractionary Fiscal Policy regressive tax Which types of taxes do federal and state governments use to generate revenue? -personal income tax (largest source of federal income, direct, progressive) role of the government to regulate demerit goods What are the different types of taxes? -proportional (flat) tax Debt the total of how much owed, the government borrows by selling US treasury bonds transfer payments government actually giving you money (welfare, social security) regressive taxes the less money you earn, the greater the percentage of your income you pay in taxes demerit goods -goods that have negative externalities (cigarettes, alcohol)
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