Question 1

How can the government increase real GDP per capita and economic growth?

Accepted Answer

By enacting public policies that increase productivity and labor force participation

(investments in education & infrastructure, production incentive programs)

Question 2

What is supply-side fiscal policy?

Accepted Answer

Policies that emphasize tax cuts and deregulation to increase the production of goods and services

Based on the idea that reducing taxes and regulations will incentivize businesses to invest more, leading to increased economic activity and job creation

Question 3

What is the goal of supply-side fiscal policies?

Accepted Answer

To create incentives for businesses and households to increase economic activity and improve efficiency in the long run

(this does not always work in reality)

Question 4

Why is supply-side fiscal policy controversial?

Accepted Answer

Providing tax breaks will disproportionately benefit the wealthy

It assumes corporations will spend money from tax cuts on new investments rather than paying shareholders

Question 5

Does all government spending lead to economic growth?

Accepted Answer

No, only spending that increases productivity or technology leads to growth

Question 6

What are investment tax credits?

Accepted Answer

Tax incentives offered by the governments to encourage businesses to invest in certain areas or industries

(allows businesses to pay less tax if they invest in some technology, such as renewable energy)

5.7 Public Policy and Economic Growth, AP Macroeconomics Flashcards