What does steady money supply growth help to accomplish?
Steadier AD growth leading to more stability
100
What is good countercyclical fiscal policy during a recession?
Government spending increases and tax cuts. Purposely running a budget deficit or a bigger deficit.
100
What happens during an Contractionary Fiscal Policy? (What goes up/down?)
AD, Gov. Spending and Deficit go DOWN & Taxes and Surplus go UP
100
To reduce a DEFICIT, one must do what?
Contractionary, Bring AD DOWN by raising Taxes and lowering Government Spending
100
The automatic stabilizer action makes deficits bigger or smaller during a recession? What about during and expansion?
Bigger. Smaller
200
What does slow money supply growth help to accomplish?
Slower AD growth leading to lower inflation rate
200
What is good countercyclical fiscal policy in a demand-pull inflation situation?
Government spending cuts and tax increases. Running a surplus or smaller deficit.
200
What happens during a recession if there is a GOOD FISCAL POLICY?
Expansionary so Deficit is UP and Surplus is DOWN
200
What is “automatic” fiscal policy?
Automatic results from impact of changes in output and interest rates on the budget
200
What type of Fiscal Policy and AD would you have if you were trying to reduce the deficit or balancing a budget during a recession? Would these improve or worsen the recession and how should you fight the recession?
Contractionary. Decrease in AD. Worsen. Increase the deficit.
300
Constant 10% per year MS growth will result in what?
Fairly steady AD growth, but 7 – 8% inflation. Growth is too fast
300
What is the difference between discretionary and automatic fiscal policy?
Discretionary requires acts of Congress and POTUS
300
What happens during a recession if there is a BAD FISCAL POLICY?
Contractionary so Deficit is DOWN and Surplus is UP
300
Why does a recession cause a budget deficit automatically?
Tax receipts fall, and govt. transfers rise since (Output) Q is down
300
How do low interest rates help to reduce government spending?
Reduces spending on interest on federal debt
400
Who runs fiscal policy?
Congress and the POTUS
400
The 2009 stimulus Package: Discretionary or Automatic Fiscal Policy?
Discretionary. Took an act of Congress.
400
What happens during a INFLATION if there is a GOOD FISCAL POLICY?
Contractionary, Deficit is DOWN and Surplus is UP
400
What should an expansion automatically do to the budget?
An existing deficit should shrink; maybe become a surplus
400
What’s it take to reduce a budget deficit?
Tax increases and/or spending cuts.
500
What does “countercyclical” mean?
Counteracts swings in AD and Q. Flatten the peaks and valleys with changes in AD.
500
What happens during an Expansionary Fiscal Policy? (What goes up/down?)
AD, Gov Spending and Deficit go UP & Taxes and Surplus go DOWN.
500
What happens during a INFLATION if there is a BAD FISCAL POLICY?
Expansion, Deficit is UP and Surplus is DOWN
500
The 2009 Stimulus Package: discretionary or automatic FP?
Discretionary. Took an act of Congress
500
The better time to reduce a budget deficit is during an expansion or contraction?