Reducing income taxes 38. Japan has been experiencing a time of economic stability with its full employment real GDP at U.S. $12 trillion. A market shock has caused the economy to slow down, and there is now a recessionary gap at real GDP U.S. $11.5 trillion. At a current level of real GDP U.S. $11.5 trillion, the economy is below the full-employment level. Which fiscal policy action should be implemented to reduce the size of this recessionary gap?Increasing government spending39. Several economists have recognized the limits of fiscal policies when attempting to stabilize or aid economic recovery. During times of economic contraction, fiscal policies are enacted to closethe recessionary gap. Which statement explains why the federal tax rebate in 2008 had minimal effects on economic activity?A one-time tax rebate does not cause a change in taxpayers' permanent income.40. Several economists have recognized the limits of fiscal policies when attempting to stabilize or aid economic recovery. During times of economic contraction, fiscal policies are enacted to closethe recessionary gap. Which three lags make fiscal policies less effective? Choose 3 answers 41. One of the offsets of fiscal policies is the time that passes from when the government ascertains there is a need to enact a fiscal policy to when the fiscal policy is officially enacted. What is the name of this time lag?Implementation lag42. Due to the lengthy impact lag between the time the contractionary fiscal policy was enacted andthe time it was effective, the economy has self-adjusted to full employment. What are the potential implications of a contractionary fiscal policy?With an economy at full employment, a Contractionary fiscal policy could bringeconomic contraction and cause a recessionary gap. 43. The government outlays are caused by transfer payments and approved expenditures to fund Federal programs, whereas the government collects revenue through tax collection. What happens when there is a budget deficit?Discretionary fiscal policy leads to spending more than is collected through tax revenues. 44. During a time of economic downturn, unemployment increases. What would be the effect of an increase in unemployment benefit payments?It would increase government outlays, move the budget toward a deficit, and increase national debt.