Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential, please explain how and why government transfer payments would change; how and why tax receipts would change; how and why the budget would change.

The government is running a balanced budget while GDP is at its potential. However, there is now an economic recession and the government makes no policy adjustments. What is the impact on the budget balance? The budget balance would decrease, moving into a surplus. The budget balance would increase, moving into a surplus. The budget balance would remain balanced because of the automatic stabiliser. The budget balance would remain balanced because the government does not change any policies. The budget balance would decrease, moving into a deficit.

Consider the following economy:(1) C = 1000 + 0.3 (Y - T)(2) I = 700(3) G = 500(4) T = 400The government decided to run a balanced budget. By how much would taxes have to increase or decrease? (

Consider the Keynesian income-expenditure model with a government sector but no foreign sector. Assume that taxation is partly endogenous and dependent on the level of income. Suppose that the government increases its expenditure by $200 million and also increases the exogenous component of taxation by $200 million. Taking the budget balance as being equal to total taxes less government expenditure, which of the following statements is correct?Group of answer choicesThe equilibrium level of income will increase by less $200 million and the budget balance would improveThe equilibrium level of income will decrease but the budget balance would actually improveThe equilibrium level of income will increase by more than $200 million and the budget balance will be unchangedThe equilibrium level of income will increase by $200 million and the budget balance will be unchanged.

The balanced budget theorem would suggest that the effect on the equilibrium level of income of an equal increase in government expenditure and in the exogeneous component of taxation would beGroup of answer choicessmaller than the increase in government expenditure if the marginal tax rate is zerozero because the expenditure and tax multipliers are the same absolute sizegreater than zero because the tax increase only indirectly affects aggregate expenditureboth the first and third alternatives above are correct.

Fiscal policy is NOT often used as a stabilisation tool. However, it does have important roles in the economy. Three of these roles are:  managing full employmen, price stability and exchange rates.   managing collection of taxes, public health and antiterrorism policy   managing government monetary policy, inflation and interest rates   managing income distribution, demographic change, and public debt   managing public assets, defence projects, and public safety Review Week 5 lecture on fiscal policy.  Question 21 / 1 ptsThe short-run effect on equilibrium GDP of an equal change in government expenditure and net taxes is a definition of:  balanced GDP   balanced savings   the balanced budget   the balanced budget multiplier   balanced growth This concept is useful when G and T change by an equal amount. Question 31 / 1 ptsGovernment budget deficits tend to  increase when there is an expansionary output gap.  remain in balance irrespective of business cycles  increase in recessions  None of the others is correct.  decrease in recessionsReview fiscal policy and measuring budget deficits in Lecture 5. Question 41 / 1 ptsIf the marginal propensity to consume equals 0.75, then a $100 increase in after-tax disposable income leads to a _____ increase in consumption.  $0.25   $25   $100   $75   $0.75 Review the Keynesian consumption function in Lecture 4. Question 51 / 1 ptsIn the basic Keynesian model, all statements below except for one are true. Which is the incorrect statement?   Planned net exports always equal actual net exports.   Planned government spending always equals actual government spending.   Planned consumption always equals actual consumption.   Planned aggregate expenditure is always equal to output in equilibrium.   Planned investment always equals actual investment. Review the Keynesian model in Lecture 4. Question 61 / 1 ptsWhich of the following acts as an automatic stabiliser?  None of the other answer options is correct.   Unemployment benefit payments to the unemployed   Interest rate changes   Increases in government spending on infrastructure   Reductions in nominal wages as the inflation rates rise Review the fiscal policy for stabilisation in Lecture 5. Question 71 / 1 ptsIf we assume that the planned aggregate expenditure is given by the equation PAE = 960 + 0.8Y so that exogenous expenditure equalled 960, with the multiplier of 5, the 10-unit drop in exogenous expenditure would result in a _____________ in short-run equilibrium output.  None of the answers is correct   50-unit decline   40-unit decline   950-unit decline   4-unit decline Review the multiplier effect in the Keynesian model in Lecture 4. Question 81 / 1 ptsSustained government deficits can be harmful because they reduce national ____, which in turn reduce _____ in new capital goods, an important source of long-run ________:  output gap; disposable income; exports   savings; investments; economic growth   inflation; poverty gap; output shortage   equality gap, employment; welfare   none of the others Think about the relation between government deficits and the economy. Question 91 / 1 ptsA$100 million increase in government purchases will have a bigger impact on equilibrium output  The smaller are the marginal tax rate and marginal propensity to import and the larger is the marginal propensity to consume.   The smaller are the marginal tax rate and marginal propensity to consume and the larger is the marginal propensity to import.   The larger are the marginal tax rate and marginal propensity to import and the smaller is the marginal propensity to consume.   The smaller are the marginal tax rate and marginal propensity to import and the smaller is the marginal propensity to consume.   The larger are the marginal tax rate and marginal propensity to import and the larger is the marginal propensity to consume. Review the four-sector economy multiplier. Question 101 / 1 ptsIf planned aggregate expenditure (PAE) in an economy equals 2000 + 0.8Y and potential output (Y*) equals 9000, then this economy has:  no induced expenditure.   No output gap.   an expansionary gap.   a recessionary gap.   no autonomous expenditure.