Sides Game

Contractionary Fiscal Policy should only be implemented when the SR macroeconomic equilibrium is to which side of LRAS right

Keynes argued that fiscal policy should be used to influence AD or AS

Revenue > Expenditure surplus

debt Sum of all deficits (+) and surplus (-) =

Stabilization policies are used to encourage sustainable growth while maintaining the delicate balance between inflation and unemployment

Change it tax laws, stimulus checks, building new stuff Give an example of discretionary fiscal policy

Revenue = Expenditure Balanced Budget

Progressive tax brackets, food stamps, welfare Give an example of an automatic stabilizer

Expansionary Fiscal Policy should only be implemented when the SR macroeconomic equilibrium is to which side of LRAS left

Social security Most intragovernment (interdepartmental) debt is held in this programs trust fund

Cyclical deficit Deficit that grows during a recessionary gap and becomes a surplus during an expansionary gap

recognition Which lag is identical in monetary and fiscal policy?

List the 3 tools of the Fed Open market operations Discount rate Reserve requirement

Decision and implementation Which two lags are MUCH longer in fiscal policy?

Less (for fear of future tax increases) According to the Ricardo-Barro theory, increased government deficit spending leads to More or less spending by consumers and businesses

Which is the main tool of monetary policy? Open market operations (buy/sell securities)

Which rate is targeted by OMO? Federal funds rate Rate banks charge each other for overnight loans

Which combination will definitely increase AD? Discount Rate decrease Government Spending increase Open Market Operations buy bonds

When further increases in the money supply do not decrease interest rates, the economy has fallen into a liquidity trap

The Phillips Curve looks at the relationship between Unemployment rate and inflation rate

Which combination will definitely reduce the inflation rate? Discount Rate increase Government Spending decrease Open Market Operations sell bonds

The crowding out effect is caused by Government deficit spending or Open Market Operations increase demand for loanable funds

When the Fed sells bonds, what happens to Interest rates increase Investment decrease RGDP decrease PL decrease

Revenue < Expenditure deficit

The LRPC looks just like which curve from the AD/AS model? LRAS

Trickle down Supply side economics is sometimes called *not the Reagan one

Laffer curve (don’t worry about it) Which curve shows that lower tax rates may produce more government revenue?

Buy bonds What should the Fed do to counter crowding out? Buy or Sell?

GAME OVER!

Models Be Able to Draw Just Know AD/AS Money Market Loanable Funds Phillips Curve Just Know Laffer Curve Investment Demand