1. The federal budgetary process This table shows three stages in the federal budgetary process. Select the appropriate month(s) of action for each of the stages. Stage Month(s) Presidential budget submission Budget resolution Congressional and presidential approvals Which of the following are true of the federal budgetary process? Check all that apply. The Congressional Budget Office (CEO) reports its evaluation at budget hearings in both the House of Representatives and the Senate. The budgetary process often goes astray due to delays in Congress. The president signs the spending and revenue bills only after Congress passes them. The following table lists federal expenditures, revenues, and GDP for the U.S. economy during several years. All numbers are in billions of dollars. Revenues Expenditures GDP Year (Billions of dollars) (Billions of dollars) (Billions of dollars) 1998 1,722 1,653 3,747 2000 2,025 1,789 9,817 2002 1,853 2,011 10,470 2004 1,880 2,293 11,686 2006 2,407 2,655 13,178 Plot the data for revenues and expenditures as a percentage of GDP on the following graph, rounded to the nearest percent. Use the orange points (square symbol) for expenditures and the green points (triangle symbol) for revenues. Line segments will automatically connect the points. ? 25 -0- Expenditures A 15 Revenues FEDERAL EXPENDITURES AND REVENUES (Percent of GDP) 0 0 1908 2000 2002 2004 2008 YEAR-0 Expenditures 20 A Revenues 15 FEDERAL EXPENDITURES AND REVENUES (Percent of GDP) 10 5 1898 2000 2002 2004 2008 YEAR In which years was the government's budget in deficit? Check all that apply. 1998 O 2000 2002 O 2004 2006 In 2000, the national debt by6. Crowding out On the following graph, AD, represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 billion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) ? 108 105 104 102 101 100 X Equilibrium 103 PRICE LEVEL (CPD) AD AD 2 8 98 AD 2 AD 87 Full Employment R 7 9 10 11 12 13 14 15 18 REAL GDP (Billions of dollars)The initial shortrun equilibrium level of real GDP is billion, and the initial shortrun equilibrium price level is Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, the government policy may result in partial crowding out. Which of the following aggregate demand curves shown in the previous graph would be conSistent with partial crowding out? AD2 ADQ All; As a result, the equilibrium level of real GDP will be billion, and the equilibrium price level will be According to critics of Keynesian fiscal policy, which of the following is true in this case? The increase in deficitfinanced government spending causes real GDP to increase, but not to fullemployment output. The increase in deficitfinanced government spending has no impact on real GDP and the price level. The increase in deficitsfinanced government spending causes real GDP to increase to fullsemployment output. Real GDP does not increase; only the price level increases. 7. Keynesian demand-side versus supply-side effects Suppose the government in a hypothetical economy increases income taxes. On the graph that follows, shift one of the curves to illustrate the impact of the increase in income taxes on aggregate supply (AS) and aggregate demand (AD) that is emphasized by Keynesian economists. (? ) Keynesian Effects O AS AD AS PRICE LEVEL (CPI) AD REAL GDP (Billions of dollars) On the graph that follows, shift one of the curves to illustrate the dominant impact of the increase in income taxes according to supply-side economists.On the graph that follows, shift one of the curves to illustrate the dominant impact of the increase in income taxes according to supply-side economists. (?) Supply-side Effects O AS AD O AS PRICE LEVEL (CPI) AD REAL GDP (Billions of dollars) Use the dropdown menus to fill in the following table to complete the causation chains for the Keynesian effects and supply-side effects of the increase In income taxes. Keynesian Policy Supply-side Policy 1. Increase in income taxes 1 . Increase in income taxes 2. Decreases consumption spending 2. Decreases the supply of labor 3. 7 aggregate 3. aggregate 4 . Real GDP and the price level 4. Real GDP and the price level