ECO 2013 Final Exam Review

Discretionary fiscal policy is:

• natural changes in real gross domestic product

• natural changes in taxes and gov't spending made by previous congresses

• deliberate changes in taxes and gov't spending implemented by Congress

• deliberate changes in real gross domestic product

Fiscal policy refers to deliberate changes in government spending and taxes to:

• promote economic instability, full employment, and price level instability

• promote economic growth, full natural employment, and price inflexibility

• promote political and social intervention in economics

• promote economic growth, full employment, and price level stability

Expansionary fiscal policy is so named because it is designed to expand what?

• government expenditures

• investment

• tax revenues

• real output

Contractionary fiscal policy shifts the aggregate demand curve in what direction?

• upward

• downward

• rightward

• leftward

Expansionary fiscal policy shifts the aggregate demand curve in what direction?

• upward

• downward

• rightward

• leftward

Refer to the diagram, in which Q_f is the full employment output. Contractionary fiscal policy would be most appropriate if this economy's present aggregate demand curve were at:

• AD₀

• AD₁

• AD₂

• AD₃

With built-in stability, what does an increase in domestic income mean?

• a reduction in a budget deficit/production of a budget surplus

• a reduction of a budget surplus/production of a budget deficit

• an increase in government expenditures and tax revenues

• a decrease in government expenditures and tax revenues

With built in stability, what does a decrease in domestic income mean?

• a reduction in a budget deficit/production of a budget surplus

• a reduction of a budget surplus/production of a budget deficit

• an increase in government expenditures and tax

• a decrease in government expenditures and taxes

Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. This diagram portrays the idea of:

• aggregate demand

• aggregate sypply

• economic growth

• built-in stability

When current government expenditures exceed current tax revenues and the economy is achieving full employment, the cyclically adjusted budget has a

• debt

• surplus

• deficit

• burst