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An increase in government spending helps to stimulate an economy. Because the government is now paying other people to do work, those people are now receiving an income. They can then reinvest in the economy, leading to an overall growth in the nation's economy.
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What is expansionary policies?
Expansionary fiscal policy is an increase in government spending or a reducing in net taxes which increase aggregate output/income (Y). +G or -T = +Y
Why is it difficult for the federal government to increase or decrease spending?
Because two thirds of all government spending is on entitlements which the government connot easily alter. (by Solomon Zelman)
What is it called when government spending does not exceed it income?
Balanced budget
When would an increase in government purchases be an appropriate countercyclical fiscal policy?
A decrease in government spending and increase in taxes.
Keynes emphasized that income was determined by what?
Comsumption, investment and government spending
Why the government spending multiplier is different form the tax multiplier?
The government spending multiplier is different form the tax multiplier from the top of my head is because the government spending total effect ripples off. That is if government spending increase then the total income increases. When total income increase, consumption increases, when consumption increases total income increases further (as consumption is a factor of total income), and this pattern is carried forward. This is the the multiplier effect, such that an increase in government spending's final impact on income is much bigger than its initial increase. The tax multiplier on the other hand, has a much smaller effect than government spending. This is because tax is only a portion of the consumer income. That is, if there is a tax cut, consumers only save a fractional amount (specifically 1-MPC) of a tax cut. As a result of the smaller boost in spending form ma tax cut, the ripples/multiplier effect of a tax cut is much less than an increase in government spending.
What are the two ways the federal government could respond to an increase in the economy?
raise income taxes and decrease government spending
What is expansionary policies?
Expansionary fiscal policy is an increase in government spending or a reducing in net taxes which increase aggregate output/income (Y). +G or -T = +Y
What is phrase that means the excess of government spending over income?
Deficit spending.
What is expansionary fiscal policy?
Expansionary fiscal policy is an increase in government spending or a reducing in net taxes which increase aggregate output/income (Y). +G or -T = +Y
Both the increased spending by the national government and the nationally imposed income tax?
Both the increased spending by the national government and the nationally imposed income tax
Why is it difficult for the federal government to increase or decrease spending?
Because two thirds of all government spending is on entitlements which the government connot easily alter. (by Solomon Zelman)
The us government has decided to issue federal income tax rebates to taxpayers what is the most likely goal of these rebates?
the goal is to get the consumer to increase their spending
Will spending less than your income increase your net worth?
True
What is it called when government spending does not exceed it income?
Balanced budget
When would an increase in government purchases be an appropriate countercyclical fiscal policy?
A decrease in government spending and increase in taxes.
Keynes emphasized that income was determined by what?
Comsumption, investment and government spending
