Fiscal Policy
The term describes government spending and government taxes
Fiscal Policy
True or False, Monetary Policy is a policy put in place by the central bank that involves the management of money supply, interest rates, government regulation.
False, government regulation is controlled by Fiscal Policies.
What is the equation for output in the Short Run
Output= C+I+G or Consumption + Investment Government spending.
What is a macroeconomic strategy enacted by governments and central banks to keep economic growth stable?
Stabilization Policy
What does CPI stand for?
Consumer Price Index
This term describes the situation when the government decreases taxes and/or increases government spending
Expansionary Fiscal Policy
What is the name of the United States central bank?
The Federal Reserve System
______ is the interest rate in terms of dollars, ______ is the interest rate in terms of a basket of goods.
Nominal Interest Rates and Real Interest Rates
What is the natural rate of unemployment in the US.
What is the market value of all final goods & services produced within a country within a year.
Gross Domestic Product
If there is a shock that impacts output, why may the Government be reluctant to implement expansionary Fiscal Policies?
It may cause a large increase in the budget deficit.
What are the major priorities of the US Central Bank?
Maximize sustainable employment, and keep inflation stable
In 2000, really low interest rates and an increasing Demand for houses, along with Mortgage lenders being more willing to give loans due to increasing competition in the industry lead to what disaster?
The US housing crisis which lead to the Financial Crisis
What will likely happen to the economy if the unemployment rate decreases to 1%?
Inflation will Increase substantially.
Sum of quantities of all final goods produced within a given country within a given year, accounting for inflation is.
Real GDP
What is a major problem if government expansion continues for an extended period of time or in other words output is greater than natural level of output.
Inflation increases greater than expected level of inflation.
What is the FED’s target inflation rate?
2%, low and stable inflation is the most effective.
This Model shows the relationship between interest rates and output.
IS-LM Model
In 2016 the US saw GDP % chance decrease from over 3% to 1.2 %, what should have been the FED’s course of action?
The FED should have decreased taxes or added money into the economy, to help the economy grow.
Unemployment rate equals
unemployed divide by labor force
What is the most effective way to increase Business Investments and Innovation
Creating a Expansionary Business Tax Policy.
In the Medium Run, what measure is impacted by monetary policy?
In the medium run, inflation is impacted.
An Expansionary Fiscal and Monetary Policy would impact the IS-LM curve in what ways?
The Fiscal Policy would shift the IS curve right and shift the LM curve down, in turn increasing output substantially.
What is the budget deficit in the US?
779 Billion
If the expected inflation rate is negative, the expected real interest rate must be ___than the nominal interest rate.
Greater