What is fiscal policy? What is the relationship between fiscal policy and the federal budget?
Fiscal policy is using the government's spending and taxing authority to affect output, prices, and employment. The federal budget is an indicator of the state of fiscal policy. Budget deficits exist when expenditures exceed revenues; budget surpluses occur when government revenues exceed spending.
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As a result of an increase in the supply of a good, the equilibrium quantity ________ and the equilibrium price ________
A) increases; falls B) increases; rises C) decreases; falls D) decreases; rises
"A rise in government expenditures raised output in the short run, but left output unaffected in the long run." This statement implies that the price level __________ in the long run, causing the interest rate to __________
A) rose; rise B) rose; fall C) fell; rise D) fell; fall
Good X is a Giffen good. When the price of X increases, the consumer will consume
a. more X. b. the same amount of X. c. less X. d. more or less X depending on the size of the income effect relative to the size of the substitution effect.
Refer to the diagram for a specific economy. Which of the following best describes a decision by policymakers that moves this economy from point b to point a?
A. Policymakers have instituted an expansionary monetary policy and/or a budgetary deficit, thereby accepting more unemployment to reduce the rate of inflation.
B. Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus,
thereby accepting a higher rate of inflation to reduce unemployment.
C. Policymakers have instituted an expansionary monetary policy and/or a budgetary deficit, thereby accepting a higher rate of inflation to reduce unemployment.
D. Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus,
thereby accepting more unemployment to reduce the rate of inflation.