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Macroeconomics

Glenn Hubbard, Tony O'Brien

Chapter 16

Fiscal Policy - all with Video Answers

Educators

DG

Section 1

What Is Fiscal Policy?

01:05

Problem 1

What is fiscal policy? Who is responsible for fiscal policy?

Jake Zanazzi
Jake Zanazzi
Numerade Educator
02:42

Problem 2

Economist Mark Thoma wrote, "One of the difficulties in using fiscal policy to combat recessions is getting Congress to agree on what measures to implement. $\ldots$ Automatic stabilizers bypass this difficulty by doing exactly what their name implies." What are automatic stabilizers? Name two examples of automatic stabilizers and explain how they can reduce the severity of a recession.

Sujita Thavva
Sujita Thavva
Numerade Educator
00:44

Problem 3

What is the difference between federal purchases and federal expenditures? Are federal purchases higher today as a percentage of GDP than they were in 1960$?$ Are federal expenditures as a percentage of GDP higher?

Majid Borumand
Majid Borumand
Numerade Educator
01:21

Problem 4

In 2009 , Congress and the president enacted "cash for clunkers" legislation that paid up to $\$ 4,500$ to people buying new cars if they traded in an older, low-gas-mileage car. Was this legislation an example of fiscal policy? Does your answer depend on what goals Congress and the president had in mind when they enacted the legislation?

Tristan Wille
Tristan Wille
Numerade Educator
03:36

Problem 5

Briefly explain whether each of the following is $(1)$ an example of a discretionary fiscal policy, (2) an example of an automatic stabilizer, or $(3)$ not an example of fiscal policy.
a. The federal government increases spending on rebuilding the New Jersey shore following a hurricane.
b. The Federal Reserve sells Treasury securities.
c. The total amount the federal government spends on unemployment insurance decreases during an expansion.
d. The revenue the federal government collects from the individual income tax declines during a recession.
e. The federal government changes the required fuel efficiency for new cars.
f. Congress and the president enact a temporary cut in payroll taxes.
g. During a recession, California voters approve additional spending on a statewide high-speed rail system.

Natalie Britton
Natalie Britton
Numerade Educator
03:46

Problem 6

The federal government collected less in total individual income taxes in 1983 than in 1982 . Can we conclude that Congress and the president cut individual income tax rates in 1983$?$ Briefly explain.

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
01:17

Problem 7

(Related to the Making the Connection on page 561) According to a Congressional Budget Office (CBO) report:
During the next decade alone, the number of people age 65 or older is expected to rise by more than one-third, and the share of the population age 65 or older is projected to grow from the current 15 percent to 21 percent in 2040 .
Why is the over-65 population increasing so rapidly? What are the implications of this increase for future federal spending on Social Security and Medicare as a percentage of GDP? What choices do policymakers face in dealing with this issue?

Ayush Kumar
Ayush Kumar
Numerade Educator