What is discretionary fiscal policy and what is its purpose?
What will be an ideal response?
Discretionary fiscal policy is the deliberate changing of government spending and/or taxes. Its purpose is to move the economy toward full employment with price stability more rapidly than it would if left on its own.
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The table below shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars.RGDPConsumption$600$590610598620606630614640622650630660638If investments were fixed at $16, taxes were zero, government purchases of goods and services were zero, and net exports were zero, then equilibrium real GDP would be $630 initially. If government purchases were then raised from $0 to $10 and lump-sum taxes also increased from $0 to $10, other things constant, the equilibrium real GDP would become
A. $630. B. $650. C. $660. D. $640.
Refer to Figure 15-16. Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners
If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged? A) Q3 units; P3 B) Q1 units; P1 C) Q1 units; P4 D) Q4 units; P6
The Federal Reserve System acts as the government's fiscal agent by
A) auditing taxpayers. B) providing checking account services for the government. C) preparing the budget the President presents to Congress every year. D) determining how to finance a deficit.
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Country A has the absolute advantage in the production of:
A. tablets only. B. iPods only. C. neither iPods nor tablets. D. both iPods and tablets.