Crash Coarse Economics - Fiscal Policy

What is Fiscal Policy used for?

• To correct fluctuations in the economy

• To increase government officials' power

• To manipulate the economy for nefarious purposes

• To decrease the country's GDP

What do economists call the situation when actual output is below potential?

• Inflationary gap

• Economic boom

• Recessionary gap

• Fiscal cliff

What is the government's response to a deep recessionary gap?

• Increase taxes

• Decrease government spending

• Do nothing

• Increase government spending and/or cut taxes

What was the American Recovery and Reinvestment Act?

• A plan to cut government spending

• A tax increase program

• A stimulus bill that added more than 800 billion dollars to the economy

• A policy to reduce inflation

What is a major criticism of Keynesian fiscal policy?

• It reduces the GDP

• It is too simple to implement

• It causes inflation

• It leads to government debt

What does 'crowding out' refer to?

• The government taking over private businesses

• Reducing private spending by increasing government spending

• Decreasing public jobs to increase private sector employment

• Increased interest rates due to government borrowing

What was the outcome of the 2009 U.S. stimulus program?

• Rapid increase in inflation

• Immediate economic recovery

• Employment and GDP both fell, but less than without stimulus

• Decrease in national debt

What is the 'multiplier effect'?

• A decrease in government spending leading to economic growth

• The initial increase in government spending leading to more total spending in the economy

• The rapid growth of the GDP due to fiscal policy

• The effect of tax cuts on government revenue

How did U.S. and European economic policies differ post-2009 financial crisis?

• Both implemented aggressive stimulus measures

• The U.S. implemented stimulus while Europe pursued austerity

• Both pursued similar austerity measures

• The U.S. pursued austerity while Europe implemented stimulus

What is a key factor in the effectiveness of fiscal stimulus?

• The level of interest rates at the time of implementation

• Public confidence and the perception of government action

• The total amount of money spent

• The political party in power