The government possesses the tools necessary to influence the output level in the short run through use of monetary and fiscal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The current tax system acts as an automatic stabilizer. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Which of the following policies are examples of automatic stabilizers? Check all that apply. Corporate income taxes Personal income taxes The federal funds rate

The government possesses the tools necessary to influence the output level in the short run through use of monetary and fiscal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The current tax system acts as an automatic stabilizer. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Which of the following policies are examples of automatic stabilizers? Check all that apply. Corporate income taxes Personal income taxes The federal funds rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. The current tax system acts as an automatic stabilizer. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Which of the following are examples of automatic stabilizers? Check all that apply. O Unemployment insurance benefits The federal funds rate Corporate income taxes O O O
Fiscal policy attempts to achieve all of the following macroeconomics objectives EXCEPT, A) sustained economic growth. B) a stable money supply. C) full employment. D) price level stability.
Automatic stabilizers refer to the money supply and interest rates that automatically increase or decrease along with the business cycle. government spending and taxes that automatically increase or decrease along with the business cycle. changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
Active policy making refers to nondiscretionary policy making. relying on policies that act as automatic stabilizers. actions taken by policy makers in response to or in anticipation of some change in the overall economy. policy making that is carried out in response to a rule.
Which statement below is NOT true regarding government intervention in the economy? Progressive income tax is a form of automatic stabilizer. If the economy is doing badly, the government should cut spending to improve it. Most suggest that government should promote macroeconomic stability. Unemployment insurance is an automatic economic stabilizer.
Label each of the following scenarios in which there are problems enacting and applying fiscal policy as being an example of either recognition lag, administrative lag, or operational lag. To fight a recession, Congress has passed a bill to increase infrastructure spending but the legally required environmental impact statement for each new project will take at least two years to complete before any building can begin. Distracted by a war that is going badly, politicians take no notice until inflation reaches 8 percent. A sudden recession is recognized by politicians, but it takes many months of political deal making before a stimulus bill is finally approved. To fight a recession, the president orders federal agencies to get rid of petty regulations that burden private businesses – but the federal agencies begin by spending a year developing a set of regulations on how to remove petty regulations.
Which of the following statements about automatic stabilizers in Canada is the most accurate? They are the responsibility of the provinces since they, unlike the federal government, do not face lag problems. They are controlled by the Bank of Canada to help manage the business cycle. They are able to completely eliminate all the lag problems associated with fiscal policy. They are changes in government transfer payments and tax revenues that vary automatically and inversely to business cycle changes.
The various kinds of automatic stabilizers are: Group of answer choices Expansionary Monetary Policy All of them Taxes and Transfer payments Increased Defense spending
Fiscal policy is a plan for taxing and spending that is designed to steer an economy in a desired direction True False
This course is designed to provide an understanding of market economies and the fluctuations they are subject to. With this in mind, please answer the questions that follow. a) Assume the economy is in a recession. Discuss how the government could implement fiscal policy to deal with the recession and the steps by which fiscal policy moves the economy out of the recession b) Why is the shape of the aggregate supply curve important in understanding the impact of monetary and fiscal policy?
Contractionary fiscal policy is designed to combat demand-pull inflation and consists of a decrease in government spending and/or an increase in taxes. Group of answer choices True False
If stability of the economy is the primary objective of Fiscal Policy, then an Annually Balanced Budget (Government Expenditures = Tax Revenues) is the best policy approach. True or False?