ECON 1010 Chapter Notes - Chapter 29: Real Wages, Laffer Curve, Tax Wedge

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18 Nov 2017

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Is the annual statement of the federal government"s outlays and revenues: to finance the activities of the federal government, to achieve macroeconomic objectives. Fiscal policy the use of the federal budget to achieve macroeconomic objectives such as full employment, sustained economic growth, and price level stability. The federal government and parliament make fiscal policy: after a long, draw-out process of consultations, the minister of finance presents a budget plan to parliament. Parliament debates the plan and enacts the laws necessary to implement it. If revenue > outlays, the government has a budget surplus. If outlays > revenue, the government has a budget deficit. If revenues = outlays, the government has a balanced budget. Government debt the total amount that the government is borrowing. It is the sum of past deficits minus past surpluses. Fiscal policy has important effects employment, potential gdp and aggregate supply, called supply-side effects.

Related Questions

Federal deficit hits record $1.42 trillion -In 2009, the government collected $2.10 trillion in revenues, a drop of 16.6 percent while government spending jumped to $3.52 trillion, up 18.2 percent over 2008. The Obama administration has pledged to include a deficit-reduction plan in its 2011 budget, which will go to Congress in February 2010. Source: Charleston Daily Mail, October 16, 2009

If the deficit-reduction plan includes a cut in transfer payments and a rise in taxes of the same amount, how will this policy influence the budget deficit and real GDP?

graygnat94

Fiscal policy is carried out primarily by

A) the Federal government.

B) state and local governments working together.

C) state governments alone.

D) local governments alone.

Fiscal policy refers to the:

A) manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

B) manipulation of government spending and taxes to achieve greater equality in the distribution of income.

C) altering the interest rate to change aggregate demand.

D) fact that equal increases in government spending and taxation will be contractionary.

Expansionary fiscal policy is so named because it:

A) involves an expansion of the nation's money supply.

B) necessarily expands the size of government.

C) is aimed at achieving greater price stability.

D) is designed to expand real GDP.

An appropriate fiscal policy for severe demand-pull inflation is:

A) an increase in government spending.

B) depreciation of the dollar.

C) a reduction in interest rates.

D) a tax rate increase.

29. The amount by which government expenditures exceed revenues during a particular year is the:

A) public debt.

B) budget deficit.

C) full-employment.

D) GDP gap.

30. If actual GDP is greater than potential GDP, we have

A) a negative GDP gap

B) a positive GDP gap

C) minimum GDP gap

D) maximum GDP gap

31. Money functions as:

A) a store of value.

B) a unit of account.

C) a medium of exchange

D) all of the choices

pinkhedgehog911

The Modified Keynesian Model

Y = C + I + G + X â IM â¦ equilibrium condition in a 4-sector model where:

C = 150 + 0.9DI â¦ consumption function

I = 50 â¦ autonomous investment

G = 100 â¦ autonomous government spending

X = 200 â¦ autonomous exports

IM = 100 â¦ autonomous imports

And also:

DI = Y â T + Tr T = 0 â¦ autonomous taxes

Tr = 0 â¦ autonomous transfer payments

YF = 5000 â¦ full-employment Y

1. Solve for the equilibrium level of real output/income (Y*) in this economy.

2. Given the model above, net exports equal $________. Does this represent a trade deficit or trade surplus?

3. Given the model above, the federal budget has a (deficit/surplus) equal to $________.

4. What is the value of the MPC? â¦ the value of the MPS?

5. Calculate the âoversimplifiedâ expenditure multiplier.

6. Suppose that full-employment (YF) equals $5000. Is there a recessionary or inflationary output gap?

7. (Refer to question â6â.) How much is the gap equal to?

8. Suppose the government chooses to eliminate the gap by using expansionary fiscal policy (i.e., increasing G). Given the numbers above, by how much would government spending (G) need to increase to achieve the goal of full-employment?

9. Suppose instead that the government decided to lower taxes to eliminate the output gap in question â6â. How much would taxes need to fall to achieve the goal of full-employment?

10. Which action (raising G or lowering T) has the largest effect on the federal budget deficit and the national debt?

11. Suppose the national debt equaled $6000 before the tax cut (refer to question â9â). What would be the value of the national debt after this policy action?

azurellama883

ECON 1010 Chapter Notes - Chapter 29: Real Wages, Laffer Curve, Tax Wedge

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