Principles of Macroeconomics: A Study Guide

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Chapter 9: The Government and Fiscal Policy True or False
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1. Discretionary fiscal policy refers to changes in taxes or spending that are the result of deliberate changes in government policy. TRUE FALSE 2. The government does not have complete control over tax revenues and certain expenditures. TRUE FALSE 3. Disposable income is the income used by households to consume, save, and pay taxes. TRUE FALSE
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4. When the economy is in equilibrium, saving plus net taxes equal planned investment plus government purchases. TRUE FALSE 5. The multiplier effect of an increase in government spending is equivalent to the multiplier effect of a decrease in taxation.
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Unformatted text preview: TRUE FALSE 6. Exports are a leakage and imports an injection into the circular flow. TRUE FALSE 7. The federal deficit was the lowest during the Reagan era, but grew substantially during the Clinton era. TRUE FALSE 8. Automatic stabilizers are automatic changes in government expenditures and taxation that tend to stabilize GDP throughout the business cycle. TRUE FALSE 9. Automatic taxation stabilizers create a so-called fiscal drag during economic expansions. TRUE FALSE 10. The full-employment budget may include a structural deficit. TRUE FALSE...
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