[Solved] Fiscal Policy Is Determined by

Prior to the 1970s, the majority of dollars spent by government was spent at the provincial and local levels.

What is fiscal policy and who is responsible for fiscal policy?

What is the difference between federal purchases and federal expenditures?

Give an example of an automatic stabilizer.Explain how automatic stabilizers work in the case of recession.

Parliament carries out fiscal policy through changes in A)interest rates and the money supply. B)taxes and the interest rate. C)government purchases and the money supply. D)government purchases and taxes. E)transfers to other government and regulations.

An increase in government purchases will increase aggregate demand because A)government expenditures are a component of aggregate demand. B)consumption expenditures are a component of aggregate demand. C)the decline in the price level will increase demand. D)the decline in the interest rate will increase demand. E)increases in government purchases cause an increase in aggregate supply.

Expansionary fiscal policy involves A)increasing government purchases or decreasing taxes. B)increasing taxes or decreasing government purchases. C)increasing the money supply and decreasing interest rates. D)decreasing the money supply and increasing interest rates. E)increasing taxes on the wealthy and increasing transfers to the poor.

Figure 12.1 Alt text for Figure 12.1: In figure 12.1, a graph comparing real GDP and price level. Long description for Figure 12.1: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).5 lines are shown; AD1, AD2, AD3, LRAS, and SRAS1.Line AD1 begins in the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope, but is plotted to the right.Similarly, line AD3 also has the same slope and is plotted to the right of AD2.Line SRAS1 begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, passing through points D, B, and E.Lines AD1 and SRAS1 intersect at point A.Lines AD2, LRAS, and SRAS1 intersect at point B.Lines AD3 and SRAS1 intersect at point C.Lines AD1 and LRAS intersect at point E.Lines AD3 and LRAS intersect at point D.The area between lines AD1 and AD2 is indicated by a right pointing arrow.The area between lines AD2 and AD3 is indicated by a right pointing arrow. -Refer to Figure 12.1.An increase in taxes would be depicted as a movement from ________, using the static AD-AS model in the figure above. A)E to B B)B to C C)A to B D)B to A E)C to D

Figure 12.1 Alt text for Figure 12.1: In figure 12.1, a graph comparing real GDP and price level. Long description for Figure 12.1: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).5 lines are shown; AD1, AD2, AD3, LRAS, and SRAS1.Line AD1 begins in the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope, but is plotted to the right.Similarly, line AD3 also has the same slope and is plotted to the right of AD2.Line SRAS1 begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, passing through points D, B, and E.Lines AD1 and SRAS1 intersect at point A.Lines AD2, LRAS, and SRAS1 intersect at point B.Lines AD3 and SRAS1 intersect at point C.Lines AD1 and LRAS intersect at point E.Lines AD3 and LRAS intersect at point D.The area between lines AD1 and AD2 is indicated by a right pointing arrow.The area between lines AD2 and AD3 is indicated by a right pointing arrow. -Refer to Figure 12.1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the static AD-AS model in the figure above, this would be depicted as a movement from A)A to B. B)B to C. C)C to B. D)B to A. E)A to E.

Figure 12.1 Alt text for Figure 12.1: In figure 12.1, a graph comparing real GDP and price level. Long description for Figure 12.1: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).5 lines are shown; AD1, AD2, AD3, LRAS, and SRAS1.Line AD1 begins in the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope, but is plotted to the right.Similarly, line AD3 also has the same slope and is plotted to the right of AD2.Line SRAS1 begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, passing through points D, B, and E.Lines AD1 and SRAS1 intersect at point A.Lines AD2, LRAS, and SRAS1 intersect at point B.Lines AD3 and SRAS1 intersect at point C.Lines AD1 and LRAS intersect at point E.Lines AD3 and LRAS intersect at point D.The area between lines AD1 and AD2 is indicated by a right pointing arrow.The area between lines AD2 and AD3 is indicated by a right pointing arrow. -Refer to Figure 12.1.Suppose the economy is in short-run equilibrium below potential GDP and Parliament and the prime minister lower taxes to move the economy back to long-run equilibrium.Using the static AD-AS model in the figure above, this would be depicted as a movement from A)A to B. B)B to C. C)C to B. D)B to A. E)A to E.