Reading 27: Fiscal Policy - LOS c ～ Q1-2

答案和详解如下：

1.Thomas Moller is an economist for Econometrics Associates. Moller’s supervisor asks him to propose how to reduce the fiscal imbalance. Moller contends that the fiscal imbalance can be reduced by raising income taxes. Moller’s colleague, Melissa Stephens, contends that the fiscal imbalance can be reduced by cutting government promised benefits.

Regarding the statements by Moller and Stephens:

A)                    Correct                               Incorrect

B)                   Incorrect                               Correct

C)                   Incorrect                              Incorrect

D)                    Correct                                Correct

The correct answer was D)

The fiscal imbalance, defined as the difference in present values between the government’s promised benefits and revenues, can be reduced by increasing taxes, cutting promised benefits, or cutting other government spending. Both Moller and Stephens are correct.

2.Which of the following most accurately describes the generational effects of fiscal policy?

A)   Fiscal stimulus generates economic activity greater than the amount of the stimulus due to the multiplier effect on future generations.

B)   Each generation of fiscal policy decisions has unintended effects that require another generation of fiscal policy actions to correct them.

C)   Fiscal imbalances must be corrected in the future by increasing taxes or decreasing government spending, and much of the burden will fall on future generations.

D)   Expansionary fiscal policy leads to the generation of waste and fraud as the government’s role in the economy increases.

The correct answer was C)

Generational effects of fiscal policy refer to the burden of government deficits, which must be corrected by future increases in taxes or decreases in government spending. Studies show that in the U.S., more than half of the burden of the fiscal imbalance will fall on future generations.