living standards of future generations and reduce private consumption and investment expenditures. Chapter Objectives After reading this chapter, you should be able to: 1. Identify the operation of fiscal policy and also the problems it encounters. 2. Explain how discretionary fiscal policy attempts to combat the problems recession and inflation. 3. Describe how the automatic stabilizers help cushion an economy during a recession. 4. Evaluate the strengths and weaknesses of supply-side fiscal policy. 5. Identify the potential effects of the federal debt. Key Concept Quiz budget deficit _____ a. when private spending falls with increased governmental expenditures balanced budget _____ b. when government spending equals tax revenues fiscal policy _____ c. decreases real output, employment and income contractionary fiscal policy _____ d. provides jobs in building highways, streets, dams, bridges, etc. expansionary fiscal policy _____ e. the time required to recognize inflation or recession project f. congressional debate process that precedes changes in fiscal policy recognition lag _____ g. the use of government expenditures and taxes to automatic stabilizers promote macroeconomic goals administrative lag _____ h. increases real output, employment and income crowding-out effect _____ i. illustrates how tax rates influence tax revenue Laffer curve _____ j. when government spending exceeds tax revenues federal debt k. changes in government spending and tax revenues that occur automatically as the economy fluctuates l. represents the cumulative outstanding borrowing from the public over the nation’s history. Multiple Choice Questions The federal government has the legal mandate to foster full employment and stable prices using its spending and taxation powers under the Employment Act of 1946 under the Humphrey-Hawkins Act of 1978 all of the
living standards of future generations and reduce private consumption and investment expenditures. Chapter Objectives After reading this chapter, you should be able to: 1. Identify the operation of fiscal policy and also the problems it encounters. 2. Explain how discretionary fiscal policy attempts to combat the problems recession and inflation. 3. Describe how the automatic stabilizers help cushion an economy during a recession. 4. Evaluate the strengths and weaknesses of supply-side fiscal policy. 5. Identify the potential effects of the federal debt. Key Concept Quiz budget deficit balanced budget fiscal policy contractionary fiscal policy expansionary fiscal policy project recognition lag automatic stabilizers administrative lag crowding-out effect Laffer curve federal debt _____ a. when private spending falls with increased governmental expenditures _____ b. when government spending equals tax revenues _____ c. decreases real output, employment and income _____ d. provides jobs in building highways, streets, dams, bridges, etc. _____ e. the time required to recognize inflation or recession f. congressional debate process that precedes changes in fiscal policy _____ g. the use of government expenditures and taxes to promote macroeconomic goals _____ h. increases real output, employment and income _____ i. illustrates how tax rates influence tax revenue _____ j. when government spending exceeds tax revenues k. changes in government spending and tax revenues that occur automatically as the economy fluctuates l. represents the cumulative outstanding borrowing from the public over the nation’s history. Multiple Choice Questions The federal government has the legal mandate to foster full employment and stable prices using its spending and taxation powers under the Employment Act of 1946 under the Humphrey-Hawkins Act of 1978 all of the
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