Explain when is an expansionary fiscal policy appropriate
Microeconomics
I. Describe the role of the CEA.
II. Define Fiscal Policy:
A. Expansionary Fiscal Policy
When is an expansionary fiscal policy appropriate?
1. Increase Government Spending
2. Reduce Taxes
3. Combination
B. Contractionary Fiscal Policy When is a contractionary fiscal policy appropriate?
1. Decrease Government Spending
2. Raise Taxes
3. Combination
III. What can the government do to finance itsdeficits?
A.
B.
IV. Explain the Crowding-Out Effect
V. List the 10 components of the index of leadingindicators.
VI. Terms
BudgetDeficit: The amount by which government expendituresexceed its revenues during a particular year.
BudgetSurplus: The amount by which government revenues exceedgovernment expenditures in a given year.
PublicDebt: The total accumulation of the FederalGovernment’s total deficits and surpluses which have occurredthrough time.
VII. Quantitative Aspects
1. debt and GDP
2. internationalcomparisons
3. interest charges
4. ownership
VIII.Ways by which the government meets its financial obligations:
1. refinancing
2. taxation
IX. Doesthe public debt impose a burden on the future generation? Whyor why not?
X. Substantive Issues
1. Unequal distribution ofincome.
2. Increased interest paymentswould have to be financed by increasing taxes, which decreasesincentives to work.
3. External debt would meanoutflow of capital.
4. crowding-out effect.
