Econ 201 Principles of Economics Exam Questions and Answers 2022

Econ 201 Principles of Economics Exam Questions and Answers 2022 Policies taken to move the economy closer to potential output Are called stabilization policies What are the two tools of fiscal policy that governmen ...

Econ 201 Principles of Economics Exam Questions and Answers 2022 Policies taken to move the economy closer to potential output Are called stabilization policies What are the two tools of fiscal policy that governments can use to stabilize an economy government spending and taxation Contractionary policies are policies designed to reduce the level of real GDP Expansionary policies are policies designed to increase the level of real GDP A White House proposal to increase infrastructure spending on roads, rail lines, and runways, is an example of expansionary fiscal policy In order to _____, a government must increase spending and decrease taxation increase aggregate demand A decrease in the personal income tax rate _____ disposable income which _____ consumption. increases; increases Tax cuts aimed at businesses can stimulate investment spending which one of the following would shift the aggregate demand curve to the left an increase in taxes As a result of an increase in the personal income tax rate, consumers are likely to spend less What is the reason that stabilization policies do not have an immediate effect on an economy There is a time lag for policies to take effect The face that it takes time for government to identify and recognize a problem is one reason for the occurrence of inside lags Which component of federal spending is included in GDP government purchases Spending on programs that _____, such as Social Security and Medicare, is classified as entitlement and mandatory spending has been authorized by prior law President Obama needs to get Congressional approval to enact measures to boos the economy. The time involved to formulate and get approval for these policies are called inside lags An example of government discretionary spending is defense spending Does the term "mandatory spending" mean that spending must go on forever no, once appropriated, spending is for the life of the program only or until it changes Who is the person who sets the rules for entitlements when spending is authorized? The congress when it appropriates the spending Outside lags is what? The amount of time for administrative policies to work. Why are transfer payments not included in GDP? They do not represent payments to those who contributed resources to currently produced goods or services. An increase in taxes to help cover the rising expenses of entitlement programs would: decrease aggregate demand, shifting the AD curve to the left A White House proposal to lower business taxes by increasing tax deductions is an example of expansionary fiscal policy Which of the following sources of revenue is used to fund government spending? taxation One school of thought that emphasizes the role that taxes play in an economy's supply of output is known as Supply-side-economics Assume an economy has a balanced federal budget, and a large increase in oil prices plunges the economy into a recession. Tax revenues will _____ and expenditures on transfer payments will _____, resulting in a budget _____. fall; increase; deficit When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called crowding out When the government develops policies to stabilize the economy it needs to consider the multiplier effect for all fiscal policies The idea that a $1 increase in infrastructure spending will generate more than $1 in economic growth is a representation of: the multiplier effect Money is anything that is regularly used and generally accepted in economic transactions or exchanges. In order for a barter transaction to be successful, there must be a double coincidence of wants The supply of money in the U.S. economy is determined primarily by the actions of the Federal Reserve and the banking system In the ________ increases in the supply of money will ______. short run; raise total demand and output When money is used to express the value of goods and services, it is functioning as a unit of account Which of the following are examples of "mediums of exchange"? all of the above