Blinn College Economics 2301 Exam 3
Review (Noel) Questions with 100%
Correct Answers
Fiscal Policy - ✔✔A government policy for dealing with the budget (especially
with taxation and borrowing/spending)
Budget Deficit - ✔✔Government Expenditures exceed Tax Revenue
Budget Surpuls - ✔✔Tax Revenue exceeds Government Expenditures
Expansionary Fiscal Policy - ✔✔A fiscal policy used to close a recessionary gap
by..
Increasing Government Purchases
Increasing Transfer Payments
Decreasing Taxes
all leading to an increase in Aggregate Demand
Contractionary Fiscal Policy - ✔✔A fiscal policy used to close an inflationary gap
by..
Decreasing Government Purchases
Decreasing Transfer Payments
Increasing Taxes
1|Page
©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025.
, all leading to a decrease in Aggregate Demand
Effects of tax changes - ✔✔-An increase in Disposable Income = an increase in
Consumption + an increase in Savings
-Increase in Consumption = Increase In Aggregate Demand
-Increase in Savings = Decrease in the real interest rate, Increase in Investment,
Increase in Aggregate Demand, Increasing SRAS and LRAS
Supply-Side Economics - ✔✔An economic philosophy that holds the sharply
cutting taxes will increase the incentive people have to work, save, and invest.
Greater investments will lead to more jobs, a more productive economy, and
more tax revenues for the government. (Laffer Curve)
-Favor lower marginal income tax rates
Laffer Curve - ✔✔A relationship between the tax rates and tax revenues that
illustrates that high tax rates could lead to lower tax revenues if economic
activity is severely discouraged.
Funding Deficits - ✔✔-The government buys money by selling bonds
Lags in Fiscal Policy - ✔✔: the time required to approve and implement fiscal
legislation
o may hamper its effectiveness and weaken discretionary fiscal policy
2|Page
©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025.
Review (Noel) Questions with 100%
Correct Answers
Fiscal Policy - ✔✔A government policy for dealing with the budget (especially
with taxation and borrowing/spending)
Budget Deficit - ✔✔Government Expenditures exceed Tax Revenue
Budget Surpuls - ✔✔Tax Revenue exceeds Government Expenditures
Expansionary Fiscal Policy - ✔✔A fiscal policy used to close a recessionary gap
by..
Increasing Government Purchases
Increasing Transfer Payments
Decreasing Taxes
all leading to an increase in Aggregate Demand
Contractionary Fiscal Policy - ✔✔A fiscal policy used to close an inflationary gap
by..
Decreasing Government Purchases
Decreasing Transfer Payments
Increasing Taxes
1|Page
©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025.
, all leading to a decrease in Aggregate Demand
Effects of tax changes - ✔✔-An increase in Disposable Income = an increase in
Consumption + an increase in Savings
-Increase in Consumption = Increase In Aggregate Demand
-Increase in Savings = Decrease in the real interest rate, Increase in Investment,
Increase in Aggregate Demand, Increasing SRAS and LRAS
Supply-Side Economics - ✔✔An economic philosophy that holds the sharply
cutting taxes will increase the incentive people have to work, save, and invest.
Greater investments will lead to more jobs, a more productive economy, and
more tax revenues for the government. (Laffer Curve)
-Favor lower marginal income tax rates
Laffer Curve - ✔✔A relationship between the tax rates and tax revenues that
illustrates that high tax rates could lead to lower tax revenues if economic
activity is severely discouraged.
Funding Deficits - ✔✔-The government buys money by selling bonds
Lags in Fiscal Policy - ✔✔: the time required to approve and implement fiscal
legislation
o may hamper its effectiveness and weaken discretionary fiscal policy
2|Page
©JOSHCLAY 2025/2026. YEAR PUBLISHED 2025.
