TOPICS
- Government Spending
Multiplier
- Lump-Sum Tax Multiplier
- Balanced Budget Multiplier
- Multiplier with Crowding Out
- Built-In Stability (Automatic Stabilzers) and the
Cyclically Adjusted Budget
- Fiscal Policy: Problems, Criticisms, and
Complication
- Supply-Side Fiscal Policy
OUTCOMES
We know that GDP = C + Ig
+ G + Xn.
If at full employment GDP would equal $500 billion, but
it is currently at $400 billion, then what increase in
government purchases (G) are needed to achieve full
employment? MPC=0.8
Explain expansionary and
contractionary fiscal policy and its effects on the
economy and Federal budget.
Compare and explain the difference
between the government spending multiplier and the
lump-sum tax multiplier
What is the balanced budget
multiplier and why is it equal to one?
If we increase government spending
by $500 million AND raise taxes by $500 million to pay
for the additional spending. What will happen to real
GDP?
Explain how the multiplier effect
is weakened when there is demand-pull
inflation.
Explain how crowding out affects
the multiplier.
Describe supply-side fiscal policy
and its affect on the multiplier
Some politicians say that if you
CUT tax rates then the government will collect
MORE in tax revenue. Explain.
Explain how built in stabilizers
help eliminate recession or inflation.
Explain the differential impacts
of progressive, proportional, and regressive taxes on the
built in stabilzers.
Explain the significance of the
"cyclically-adjusted budget" concept.
Describe recent U.S. fiscal policy
actions and the motivation behind them.
List and define three timing
problems encountered with fiscal policy
State political problems that
limit effective fiscal policy and explain the "political
business cycle".
Identify actions by state and
local governments that can offset fiscal
policy.
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