Give a brief definition of fiscal policy. What are its economic goals?
What will be an ideal response?
Fiscal policy is the use of the federal budget to achieve full employment, control inflation, and stimulate economic growth. The changes to the federal budget can be made through increases or decreases in government spending or increases or decreases in tax revenues.
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If government raised taxes on the rich and this resulted in a decrease in productivity, the increase in taxes will still definitely make society better off
Indicate whether the statement is true or false
If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are
A) perfect complements. B) unrelated. C) perfect substitutes. D) not desirable.
Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?
A) accounting cost vs. direct cost B) historical cost vs. replacement cost C) sunk cost vs. fixed cost D) variable cost vs. incremental cost
If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.