ECON 201 Exam 4 with verified detailed solutions ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Fiscal policy - correct answer✔✔Changes in government spending or taxation to promote
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full employment, price-level stability, and economic growth.
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Council of Economic Advisers (CEA) - correct answer✔✔A group of the economists
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appointed by the US President to provide advice and assistance on economic matters.
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Expansionary Fiscal policy - correct answer✔✔An increase in government spending, a ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
decrease in taxes, or some combination of the two for the purpose of increasing aggregate
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demand and real output. ||//\\|| ||//\\|| ||//\\||
Budget Deficit - correct answer✔✔The amount by which expenditures of the federal
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government exceed its revenues in any year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
(Restrictive) Contractionary fiscal policy - correct answer✔✔A decrease in government ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
spending, an increase in taxes, or some combination of the two for the purpose of
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decreasing aggregate demand and halting inflation. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Budget surplus - correct answer✔✔The amount by which revenues of the federal
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government exceed its expenditures in any year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Built-in Stabilizer - correct answer✔✔Anything that increases the government's budget
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deficit (or reduced budget surplus) during a recession and increases its budget surplus (or
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
reduced budget deficit) during expansion without requiring explicit action by policymakers.
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, Cyclical adjusted budget - correct answer✔✔A measure of what the federal budget deficit
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or surplus would be with existing tax rates and government spending programs of the
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economy had achieved it's full-employment GDP in the year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Cyclical deficit - correct answer✔✔A federal budget deficit that is caused by a recession and
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the consequent decline in tax revenues.
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Political business cycle - correct answer✔✔The alleged tendency of presidential
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administrations and Congress to create macroeconomic instability by reducing taxes and ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
increasing government spending before elections, and by raising taxes and reducing ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
expenditures after elections. ||//\\|| ||//\\||
Problems with fiscal policy - correct answer✔✔Problems of timing ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Political considerations ||//\\||
Future policy reversals ||//\\|| ||//\\||
Offsetting state and local finance ||//\\|| ||//\\|| ||//\\|| ||//\\||
Crowding out effect ||//\\|| ||//\\||
Crowding out effect - correct answer✔✔A decrease in private investment caused by higher ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
interest rates that result from the federal government's increases borrowing to finance
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deficits or debt. ||//\\|| ||//\\||
Public debt - correct answer✔✔Total amount of money owed by the fed government to the
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owners of government securities; equal to the sum of last government budget deficits less
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government budget surpluses. ||//\\|| ||//\\||
US securities - correct answer✔✔Treasury bills, Treasury notes, and US savings bonds
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issued by fed government to finance expenditures that exceed tax revenues
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Fiscal policy - correct answer✔✔Changes in government spending or taxation to promote
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
full employment, price-level stability, and economic growth.
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Council of Economic Advisers (CEA) - correct answer✔✔A group of the economists
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
appointed by the US President to provide advice and assistance on economic matters.
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Expansionary Fiscal policy - correct answer✔✔An increase in government spending, a ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
decrease in taxes, or some combination of the two for the purpose of increasing aggregate
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
demand and real output. ||//\\|| ||//\\|| ||//\\||
Budget Deficit - correct answer✔✔The amount by which expenditures of the federal
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
government exceed its revenues in any year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
(Restrictive) Contractionary fiscal policy - correct answer✔✔A decrease in government ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
spending, an increase in taxes, or some combination of the two for the purpose of
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
decreasing aggregate demand and halting inflation. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Budget surplus - correct answer✔✔The amount by which revenues of the federal
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
government exceed its expenditures in any year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Built-in Stabilizer - correct answer✔✔Anything that increases the government's budget
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
deficit (or reduced budget surplus) during a recession and increases its budget surplus (or
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
reduced budget deficit) during expansion without requiring explicit action by policymakers.
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
, Cyclical adjusted budget - correct answer✔✔A measure of what the federal budget deficit
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
or surplus would be with existing tax rates and government spending programs of the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
economy had achieved it's full-employment GDP in the year. ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Cyclical deficit - correct answer✔✔A federal budget deficit that is caused by a recession and
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
the consequent decline in tax revenues.
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Political business cycle - correct answer✔✔The alleged tendency of presidential
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
administrations and Congress to create macroeconomic instability by reducing taxes and ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
increasing government spending before elections, and by raising taxes and reducing ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
expenditures after elections. ||//\\|| ||//\\||
Problems with fiscal policy - correct answer✔✔Problems of timing ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Political considerations ||//\\||
Future policy reversals ||//\\|| ||//\\||
Offsetting state and local finance ||//\\|| ||//\\|| ||//\\|| ||//\\||
Crowding out effect ||//\\|| ||//\\||
Crowding out effect - correct answer✔✔A decrease in private investment caused by higher ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
interest rates that result from the federal government's increases borrowing to finance
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
deficits or debt. ||//\\|| ||//\\||
Public debt - correct answer✔✔Total amount of money owed by the fed government to the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
owners of government securities; equal to the sum of last government budget deficits less
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
government budget surpluses. ||//\\|| ||//\\||
US securities - correct answer✔✔Treasury bills, Treasury notes, and US savings bonds
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
issued by fed government to finance expenditures that exceed tax revenues
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