Problem 5
What is the role of the Council of Economic Advisers?
Problem 5
How is the crowding-out effect related to the national debt?
Problem 5
Which fiscal policy tool does the Laffer Curve address?
Problem 7
Between 2001 and 2004 , Congress passed a series of tax cuts and increased government spending. Do these actions reflect expansionary or contractionary fiscal policy? Explain your answer.
Problem 7
In 2007 , the federal government was expected to have tax revenue of 2,350.8 billion dollars. Total federal spending was estimated at 2,592.1 billion dollars. Would the government have a budget deficit or a budget surplus that year? How much would it be?
Problem 8
Applying Economic Concepts Suppose that the federal government decides to increase its spending on highway construction by \(\$ 5\) billion to keep the economy from falling into a recession. Explain the real impact on GDP of this spending.
Problem 8
Agricultural price supports provide farmers with government subsidies when market prices of certain crops are low. What kind of fiscal policy is at work in this situation and how does it work?
Problem 8
Each of the following headlines reflects an example of deficit spending. Which of the causes of budget deficits is suggested by each headline? a. President Proposes Tax Cut Extensions to Keep Economy on Track b. Baby Boomers' Retirement Will Strain Social Security and Medicare c. Hurricane Recovery Effort to Require Massive Federal Aid
Problem 9
Federal government officials want to prevent a slowing economy from going into recession. They debate whether to increase spending on new public transit systems or decrease individual and corporate income tax rates. a. How would an understanding of policy lags help them decide which government action would be most effective? b. What other issues might affect their decision?
Problem 9
Analyzing Effects Tom, Cia, and Julie were all in the 50 percent tax bracket. When a tax cut program reduced their tax bracket to 28 percent, they all made changes in their lives. Tom decided to work fewer hours so he could begin training to run in a marathon. Cia bought the new sports car she'd been wanting. Julie chose to work more hours so she could save extra money for her daughter's college education. Explain the effects of the tax cut for each individual. Use supply-side or demand-side economics reasoning in your answer.
