Fiscal policy designed to increase aggregate demand during economic downturns and decrease aggregate demand during economic booms is called
Answer(s): D
Counter-cyclical fiscal policy promotes the economy's use of its "automatic stabilizers": government expenditures should rise during recessions (increasing aggregate demand) and should fall during economic booms (decreasing aggregate demand).
________ policy may be used by government officials to deliberately generate a budget deficit.
Answer(s): A
Discretionary fiscal policy is defined as policymakers instituting deliberate changes in tax laws or spending on government programs that are designed to generate a budget deficit. Deficits emanating from this source are referred to as active budget deficits.
Deposits denominated in U.S. dollars at banks and other financial institutions outside the U.S. are known as ________.
Answer(s): E
Although this name originated because of the large amounts of such deposits held at banks in Western Europe, similar deposits in other parts of the world are also called Eurodollars.
The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government's tax and spending policies should be determined by the
Keynesian economists suggest that the government should operate under budget deficits when the economy is in a recession and under a surplus when the economy is growing very quickly. The consequence of this "counter-cyclical" policy will be a stabilization of the economy orchestrated through the government's contribution to aggregate demand. The government should attempt to stabilize the economy through its contribution to aggregate demand.
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