Fiscal Policy
A tax whose average tax rate increases as the taxpayer's income increases is a(n)
Progressive Tax
The money supply is backed
by the government's ability to control the supply of money and therefore to keep its value relatively stable.
The sale of government securities by the Fed will causethe money supply to
decrease.
Present value is best defined as the
value today of some amount of money that is to be received at a future date.
In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the
short run.
A major advantage of the built-in or automatic stabilizers is that they
require no legislative action by Congress to be made effective.
Other things equal, an excessive increase in the money supply will
decrease the purchasing power of each dollar.
The Fed's inability to stimulate the economy by reducing interest rates is known as the
zero lower bound problem.
What exactly equals the total present value of all of the asset's future payments?
The price of an asset
The long-run aggregate supply curve is _______ because resource prices eventually change in response to changes in output prices.
vertical
If the economy has a cyclically-adjusted budget ____ , this means that tax revenues would exceed government expenditures if full employment were achieved.
surplus
The central authority of the U.S. banking system is the
Board of Governors of the Federal Reserve.
One of the strengths of monetary policy relative to fiscal policy is that monetary policy
can be implemented more quickly.
_______________can be received either through the sale of an asset or as a stream of payments.
Investment returns
Inflation in the U.S. economy tends to be ongoing because____
increases in aggregate demand generally exceed the increases in aggregate supply.
One timing problem in using fiscal policy to counter a recession is the "operational lag" that occurs between the
time fiscal action is taken and the time that the action has its effect on the economy.
.
When there is inflation in the economy, it implies that the
price index is rising and the purchasing power of money is falling.
Monetary policy is thought to be _______ in controlling inflation than in moving the economy out of a recession.
more effective
When financial economists use the word "risk," they mean the outcome
lacks certainty and could be good or bad.
An adverse aggregate supply shock could result from
a rapid rise in input prices
The ____ effect of expansionary fiscal policy suggests that government spending increases at the expense of private investment.
crowding-out
If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will
rise, causing households and businesses to hold less money.
The Federal Reserve can increase aggregate demand by
reducing the three administered interest rates.
To reduce the risk of losing their investment, Ivestors___________.
diversify portfolios
When the actual rate of inflation exceeds the expected rate firms will experience rising profits and thus ____ their employment.
increase