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Chapter 13: Supply Side Fiscal Policy (page 264)
How are supply-side policies implemented and what types of supply-side policies are used?
Reduction of taxation
Interventionist
Non-Interventionist
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Assume that a hypothetical economy with an MPC of .8 is experiencing a severe recession. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? How large a tax cut would be needed to achieve the same increase in aggregate demand? Determine one possible combination of government spending increases and tax decreases that would accomplish the same goal.
What happens to the taxation and government spending rates during an expansionary fiscal policy?
What do economists mean when they say Social Security and Medicare are 鈥減ay-as-you-go鈥� plans? What are the Social Security and Medicare trust funds, and how long will they have money left in them? What is the key long-run problem of both Social Security and Medicare? To fix the problem, do you favor increasing taxes or do you prefer reducing benefits?
Why might economists be quite concerned if the annual interest payments on the US public debt sharply increase as a percentage of GDP?
Briefly state and evaluate the problem of time lags in enacting and applying fiscal policy. Explain the idea of a political business cycle. How might expectations of a near-term policy reversal weaken fiscal policy based on changes in tax rates? What is the crowding-out effect, and why might it be relevant to fiscal policy?
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