Chapter 15 - Fiscal Policy, Deficits, and Debt
28. Refer to the above graph. Assume that the economy is in a recession with a price level of
and output level
. The government then adopts an expansionary fiscal policy to shift the
aggregate demand curve. What will be the most likely new equilibrium price level and
29. Refer to the above graph. Assume that the economy initially has a price level of P
output level Q
. The price level is flexible and the government decides to adopt a
contractionary fiscal policy. What would most likely be the new equilibrium price level and
30. Discretionary fiscal policy refers to:
A. any change in government spending or taxes that destabilizes the economy.
B. the authority that the President has to change personal income tax rates.
C. changes in taxes and government expenditures made by Congress to stabilize the economy.
D. changes in taxes and transfers that occur as GDP changes.
31. Fiscal policy refers to the: