Question : Expansionary fiscal policy involves:
Option 1: Decreasing government expenditure and increasing taxes
Option 2: Increasing government expenditure and increasing taxes
Option 3: Decreasing government expenditure and decreasing taxes
Option 4: Increasing government expenditure and decreasing taxes
Correct Answer: Increasing government expenditure and decreasing taxes
Solution : The correct answer is (d) increasing government expenditure and decreasing taxes.
Expansionary fiscal policy is used to stimulate economic growth and increase aggregate demand during times of recession or low economic activity. To implement expansionary fiscal policy, the government typically increases its spending on various goods, services, infrastructure projects, and programs. This increased government expenditure injects more money into the economy, creating demand for goods and services and stimulating economic activity.
In addition to increasing government expenditure, expansionary fiscal policy also involves decreasing taxes. Lowering taxes provides individuals and businesses with more disposable income, which encourages increased consumption and investment. This, in turn, further boosts aggregate demand and economic growth.
Question : Contractionary fiscal policy involves:
Option 1: Decreasing government spending and increasing taxes
Option 2: Increasing government spending and increasing taxes
Option 3: Decreasing government spending and decreasing taxes
Option 4: Increasing government spending and decreasing taxes
Question : The government's policy of reducing taxes to stimulate economic growth is known as ____________.
Option 1: Austerity measures
Option 2: Expansionary fiscal policy
Option 3: Contractionary fiscal policy
Option 4: Supply-side economics
Question : The fiscal policy refers to changes in:
Option 1: Government expenditure and taxation
Option 2: Interest rates and money supply
Option 3: Exchange rates and trade policies
Option 4: Labor market regulations
Question : The process of increasing government spending and/or decreasing taxes in order to stimulate economic growth is known as:
Option 1: Fiscal austerity
Option 2: Fiscal stimulus
Option 3: Fiscal responsibility
Option 4: Fiscal consolidation
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile