What's the fiscal policy? Which factors limit its effect ( i.e. crowding out, the impacts of financing government's spending) . Why you would advocate either expansionary or contractionary policy under recession, and growth. Please discribe your position on expansionary policy and Contractionary policy. If niether, why? Describe the intended impact of the policy on the consumer, business, and the economy overall.© BrainMass Inc. brainmass.com October 25, 2018, 1:20 am ad1c9bdddf
Graduate discussion on fiscal policy, its limits, and its impact on the overall economy.
What's the fiscal policy?
Fiscal policy refers to government action of increasing or decreasing its spending, and making changes in taxation to affect the economy.
Which factors limit its effect ( i.e. crowding out, the impacts of financing government's spending)
The factors that limit its effect are that when the government finances its spending with the issue of government bonds, there is an increase in the interest rates in the market. The government bonds increase the demand for credit and this prevents the private borrowers from getting access to funds. This is called the crowding out effect.
The other limitation is that an increase in ...
This explanation provides you a comprehensive argument relating to fiscal policy, its limits, and its impact on the overall economy
12816 Q ECO
Econ 360 Final Exam
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labor.
____ 1. Refer to Figure 3-3. The opportunity cost of 1 pair of tap shoes for Fred is
a. 1/3 pair of ballet slippers.
b. 1/5 pair of ballet slippers.
c. 3/5 pair of ballet slippers.
d. 5/3 pairs of ballet slippers.
____ 2. Refer to Figure 3-3. The opportunity cost of 1 pair of ballet slippers for Ginger is
a. 3/4 pair of tap shoes.
b. 1/5 pair of tap shoes.
c. 3/5 pair of tap shoes.
d. 5/3 pairs of tap shoes.
____ 3. Refer to Figure 3-3. Ginger has an absolute advantage in
a. tap shoes and Fred has a comparative advantage in ballet slippers.
b. both goods and Fred has a comparative advantage in neither good.
c. ballet slippers and Fred has a comparative advantage in tap shoes.
d. neither good and Fred has a comparative advantage in both goods.
____ 4. Trade
a. allows a person to consume at a point outside his production possibilities frontier.
b. limits a person's ability to produce goods and services on her own.
c. must benefit both traders equally.
d. is based on absolute advantage.
____ 5. Which of the following is correct?
a. The value of all intermediate goods and final goods are included in GDP.
b. The value of intermediate goods are included in GDP only if they were produced in the previous year.
c. The value of intermediate goods are included in GDP only if they are purchased by firms rather than households.
d. The value of intermediate goods are not included in GDP.
____ 6. National income is defined as
a. all income produced within a country.
b. the total income earned by a nation's residents from the production of goods and services within the borders of the country.
c. the total income earned by a nation's residents in the production of goods and services.
d. the income received by the national government.
____ 7. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result
a. U.S. investment and GDP increase, but German GDP is unaffected.
b. U.S. investment and German GDP increase, but U.S. GDP is unaffected.
c. U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods.
d. U.S. investment, U.S. GDP, and German GDP all increase.
____ 8. Which of the following agencies calculates the CPI?
a. the National Price Board
b. the Department Of Weight and Measurements
c. the Bureau of Labor Statistics
d. the Congressional Budget Office
____ 9. An inflation rate calculated using the CPI shows the rate of change of
a. all prices.
b. the prices of all final goods and services.
c. the prices of all consumer goods.
d. the prices of some consumer goods.
____ 10. Of the following, which makes up the smallest category of consumer spending in the United States?
a. food and beverages
____ 11. Economists use the word "money" to refer to
a. income generated by the production of goods and services.
b. those assets regularly used to buy goods and services.
c. the value of a person's assets.
d. the value of stocks and bonds.
____ 12. The Fed can increase the money supply by conducting open market
a. sales and raising the discount rate.
b. sales and lowering the discount rate.
c. purchases and raising the discount rate.
d. purchases and lowering the discount rate.
____ 13. If Congress cuts spending to balance the federal budget, the Fed can act to prevent unemployment and recession while maintaining the balanced budget by
a. increasing the money supply.
b. decreasing the money supply.
c. raising taxes.
d. cutting expenditures.
____ 14. Which of the following policies would someone who wants the government to follow an active stabilization policy recommend when the economy is experiencing unemployment above the natural rate?
a. decrease the money supply
b. increase government expenditures
c. increase taxes
d. All of the above are correct.
____ 15. There is a
a. short-run tradeoff between inflation and unemployment.
b. short-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
c. long-run tradeoff between inflation and unemployment.
d. long-run tradeoff between the actual unemployment rate and the natural rate of unemployment.
____ 16. Phillips found a
a. positive relation between unemployment and inflation in the United Kingdom.
b. positive relation between unemployment and inflation in the United States.
c. negative relation between unemployment and inflation in the United States.
d. negative relation between unemployment and inflation in the United Kingdom.
____ 17. Suppose that Congress changed the laws governing the Fed such that Congress gained control over monetary policy. Shortly after that, Congress decided that it would significantly increase its spending, and it would fund the new spending by printing money. If expectations are completely rational, one might expect that the resulting inflation would
a. reduce unemployment substantially in the short run, but not in the long run.
b. probably not have much impact on unemployment in the short run or the long run.
c. reduce unemployment substantially in the short run and in the long run.
d. only reduce unemployment in the long run because it would be anticipated.
____ 18. A monetary injection by the Fed
a. increases interest rates and increases aggregate demand.
b. increases interest rates and decreases aggregate demand.
c. decreases interest rates and decreases aggregate demand.
d. decreases interest rates and increases aggregate demand.
____ 19. In the long run, fiscal policy primarily affects
a. aggregate demand. In the short run, it affects primarily aggregate supply.
b. aggregate supply. In the short run, it affects primarily saving, investment, and growth.
c. saving, investment, and growth. In the short run, it affects primarily aggregate demand.
d. saving, investment, and growth. In the short run, it affects primarily aggregate supply.
____ 20. An increase in government spending initially and primarily shifts
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. neither aggregate demand nor aggregate supply.
____ 21. If the MPC = .85, then the government purchases multiplier is about
____ 22. Which of the following correctly explains the crowding-out effect?
a. An increase in government expenditures decreases the interest rate and so increases investment spending.
b. An increase in government expenditures increases the interest rate and so reduces investment spending.
c. A decrease in government expenditures increases the interest rate and so increases investment spending.
d. A decrease in government expenditures decreases the interest rate and so reduces investment spending.
____ 23. Supply-side economists focus more than other economists on
a. how fiscal policy affects consumption.
b. the multiplier affect of fiscal policy.
c. how fiscal policy affects aggregate supply.
d. the accelerator and exchange-rate effects.
____ 24. Which of the following is not an automatic stabilizer?
a. the minimum wage
b. the unemployment compensation system
c. the federal income tax
d. the welfare system
____ 25. Closely watched indicators such as the inflation rate and unemployment are released each month by the
a. Bureau of the Budget.
b. Bureau of Labor Statistics.
c. Department of the Treasury.