Chapter 15 Fiscal Policy

| November 9, 2018

21)
The fact that it takes time for government to take action, even after a problem
has been diagnosed, is one reason for the occurrence of
A)
inside lags.
B)
outside lags.
C)
crowding out.
D)
the multiplier effect.

22)
President Obama needs to get Congressional approval to enact measures to boost
the economy. The time involved to formulate and get approval for these policies
are called
A)
inside lags.
B)
outside lags.
C)
automatic stabilization.
D)
crowding in.

23)
Even when the Obama administration succeeds with its effort to gain
Congressional approval for its stimulus proposals, it will still take time for
these policies to actually work. The time it takes for these policies to work
is known as
A)
inside lags.
B)
outside lags.
C)
automatic stabilization.
D)
crowding out.

24)
Taxation and government spending are examples of fiscal policy tools used to
stabilize an economy.

25)
Economic advisers who fear that the economy is growing too rapidly would
recommend that the government decrease spending and/or increase taxes.

26)
Changes in government purchases affect aggregate demand only indirectly through
consumption spending.

27)
Stabilization policies are actions taken to bring the economy closer to full
employment.

28)
An outside lag is the time period it takes economists to formulate a
stabilization policy.

29)
An inside lag is the time period it takes for the stabilization policies to
take effect after they have been implemented.

30)
Briefly explain how a change in the personal income tax rate affects aggregate
demand.

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