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Class:ECO 5111 - MICROECONOMIC THEORY
Subject:ECONOMICS
University:Florida State University
Term:Fall 2012
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equilibrium income resulting from an independent change in spending. The expenditure multiplier is used to calculate the change in
an irregular rise and fall in aggregate demand are an important potential source of business instability. Which of the following is a major insight of the Keynesian model? 
additional bonds issued by the U.S. Treasury
If the federal government runs a budget deficit in order to finance an increase in spending, where do the funds 
to finance the spending come from?
governmnet revenues( the money like taxes, etc.) exceed governmnet expeditures When the federal government is running a budget surplus,
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be timed correctly If a fiscal policy change is going to exert a stabilizing impact on the economy, it must
reduce the ups and downs in aggregate demand without legislative action Automatic stabilizers are government programs that tend to
larger budget deficits When the economy enters a recession, automatic stabilizers create 
disposable income In the Keynesian model, the primary determinant of consumer spending is 
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an increase in one's expected future income Which of the following is most likely to lead to an increase in current consumption
a budget deficit is needed if the economy is operating at less than full employment. Keynesian countercyclical budget policy suggests that
a budget deficit
According to Keynesian theory, which of the following would most likely stimulate an expansion in real 
output if the economy were in a recession? 
the prolonged unemployment of the 1930s
The Keynesian macroeconomic model was highly popular for several decades following World War II 
because it provided an explanation for
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insufficient aggregate spending on goods and services. John Maynard Keynes and his followers argued that the Great Depression was primarily the result of
an increase in aggregate demand If output is less than full employment in the Keynesian model, what is needed to restore full employment? 
an increase in government expenditures or reduction in taxes, financed by borrowing
According to the Keynesian view, if policy makers thought the economy was about to fall into a recession, 
which of the following would be most appropriate? 
its in a balanced budget what happens when the governmnent's revenues' from taxes and other sources is equal to its total expenditure
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budget surplus definition: when the government's revenues exceed its total expenditures. The surplus allows the govt. to reduce its outstanding debt. 
Fiscal policy involves the use of government’s spending, taxing, and borrowing policies. For Keynesian fiscal policy, we are going to assume that the monetary authorities are holding the supply of money constant. The federal budget is the primary tool of fiscal policy. What is fiscal policy? What is the relationship between fiscal policy and the federal budget?
When the supply of money is constant, government expenditrues must be financed with either: - taxes or evenues derived from other sources -or borrowing. How does Keynesian economic theory recommend that fiscal policy be conducted?
Initially, economy is operating below potential capacity and unemployment exceeds its natural rate. - If there is no change in policy, abnormally high unemployment and excess supply in the resource market will eventually reduce wages and other resource prices, which will lower costs and direct the economoy toward a full-employment equilibrium. - In addition, weak demand for investment goods will place downward pressure on interest rates, which will stimulate aggregate demand and also help to direct the economy back to full employment. According to the Keynesian model, in what ways will expansionary fiscal policy stimulate aggregate demand?
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the effects of fiscal policy take a long time. Proper timing of fiscal policy is not an easy task. There are three major reasons why: - a change in fiscal policy will require legislative action- the political process moves slowly- lawmakers need to meet and all decide that that is the y right course of action. -a change in policy will not immediately impact the macroeconomy. Although a tax cut might exert some stimulus more quickly, typically several months will pass before the primary effects of the cut are felt throughout the economy. -because of these delays, if fiscal policy is going to exert a stabilizing influence, policy-makers need to know what economic conditions are going to be likely twelve to eighteen months in the future. Our ability to forecast a recession or economic boom is very limited.

What three types of timing problems might policy makers experience when conducting discretionary fiscal

policy?

If timed correctly, it will reduce economic instability. But, when timed incorrectly, a fiscal policy change can also be a source of instability. Is there any way to conduct fiscal policy and avoid the lags involved with discretionary policy?
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 equilibrium income resulting from an independent change in spending.The expenditure multiplier is used to calculate the change in
 an irregular rise and fall in aggregate demand are an important potential source of business instability.Which of the following is a major insight of the Keynesian model? 
 additional bonds issued by the U.S. Treasury
If the federal government runs a budget deficit in order to finance an increase in spending, where do the funds 
to finance the spending come from?
 governmnet revenues( the money like taxes, etc.) exceed governmnet expedituresWhen the federal government is running a budget surplus,
 be timed correctlyIf a fiscal policy change is going to exert a stabilizing impact on the economy, it must
 reduce the ups and downs in aggregate demand without legislative actionAutomatic stabilizers are government programs that tend to
 larger budget deficitsWhen the economy enters a recession, automatic stabilizers create 
 disposable incomeIn the Keynesian model, the primary determinant of consumer spending is 
 an increase in one's expected future incomeWhich of the following is most likely to lead to an increase in current consumption
 a budget deficit is needed if the economy is operating at less than full employment.Keynesian countercyclical budget policy suggests that
 a budget deficit
According to Keynesian theory, which of the following would most likely stimulate an expansion in real 
output if the economy were in a recession? 
 the prolonged unemployment of the 1930s
The Keynesian macroeconomic model was highly popular for several decades following World War II 
because it provided an explanation for
 insufficient aggregate spending on goods and services.John Maynard Keynes and his followers argued that the Great Depression was primarily the result of
 an increase in aggregate demandIf output is less than full employment in the Keynesian model, what is needed to restore full employment? 
 an increase in government expenditures or reduction in taxes, financed by borrowing
According to the Keynesian view, if policy makers thought the economy was about to fall into a recession, 
which of the following would be most appropriate? 
 its in a balanced budgetwhat happens when the governmnent's revenues' from taxes and other sources is equal to its total expenditure
 budget surplusdefinition: when the government's revenues exceed its total expenditures. The surplus allows the govt. to reduce its outstanding debt. 
 Fiscal policy involves the use of government’s spending, taxing, and borrowing policies. For Keynesian fiscal policy, we are going to assume that the monetary authorities are holding the supply of money constant. The federal budget is the primary tool of fiscal policy.What is fiscal policy? What is the relationship between fiscal policy and the federal budget?
 When the supply of money is constant, government expenditrues must be financed with either: - taxes or evenues derived from other sources -or borrowing.How does Keynesian economic theory recommend that fiscal policy be conducted?
 Initially, economy is operating below potential capacity and unemployment exceeds its natural rate. - If there is no change in policy, abnormally high unemployment and excess supply in the resource market will eventually reduce wages and other resource prices, which will lower costs and direct the economoy toward a full-employment equilibrium. - In addition, weak demand for investment goods will place downward pressure on interest rates, which will stimulate aggregate demand and also help to direct the economy back to full employment.According to the Keynesian model, in what ways will expansionary fiscal policy stimulate aggregate demand?
 the effects of fiscal policy take a long time. Proper timing of fiscal policy is not an easy task. There are three major reasons why: - a change in fiscal policy will require legislative action- the political process moves slowly- lawmakers need to meet and all decide that that is the y right course of action. -a change in policy will not immediately impact the macroeconomy. Although a tax cut might exert some stimulus more quickly, typically several months will pass before the primary effects of the cut are felt throughout the economy. -because of these delays, if fiscal policy is going to exert a stabilizing influence, policy-makers need to know what economic conditions are going to be likely twelve to eighteen months in the future. Our ability to forecast a recession or economic boom is very limited.

What three types of timing problems might policy makers experience when conducting discretionary fiscal

policy?

 If timed correctly, it will reduce economic instability. But, when timed incorrectly, a fiscal policy change can also be a source of instability.Is there any way to conduct fiscal policy and avoid the lags involved with discretionary policy?
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