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How do expansionary fiscal policies affect the economy?
 
a. The government decreases spending to save more money.
b. The government increases spending to raise the output of goods and services and create jobs in the short term.
c. The government decreases the demand to reduce the growth of economic output.
d. The government increases supplies to increase inflation and raise prices.

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Samantha Balando
Samantha BalandoLv7
16 Oct 2020

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Related questions

The crowding-out effect of expansionary fiscal policy suggests that: tax increases are paid primarily out of?

a. saving and therefore are not an effective fiscal policy action.

b. an increase in government spending financed through borrowing may increase the interest rate and thereby reduce investment spending.

c. an increase in government spending will stimulate real output in the economy and crowd-out out the unemployment of workers.

d. tax cuts will pay for themselves because they will increase real output to make the economy more efficient.

The crowding-out effect of expansionary fiscal policy suggests that:

a. tax increases are paid primarily out of saving and therefore are not an effective fiscal policy action.

b. an increase in government spending financed through borrowing may increase the interest rate and thereby reduce investment spending.

c. an increase in government spending will stimulate real output in the economy and crowd-out out the unemployment of workers.

d. tax cuts will pay for themselves because they will increase real output to make the economy more efficient.

1) Suppose the federal government reduces its spending to balance its budget. If the Federal Reserve wants to completely offset the effects of this policy in terms of economic growth, unemployment and inflation, what should the Fed do?

A) purchase bonds or raise the required reserve ratio

B) sell bonds or raise the required reserve ratio

C) purchase bonds or lower the required reserve ratio

D) sell bonds or lower the required reserve ratio

E) None of the above

 

2) Geopolitical uncertainty drives oil prices higher the results in an aggregate supply shock. In response, the Federal Reserve increases its target interest rate. In the short run, relative to short-run equilibrium situation if the Federal Reserve undertakes no action, output (RGDP) _______ and the price level _________.

A) increases; increases

B) increases; decreases

C) decreases; increases

D) decreases; decreases

E) unchanged; decreases

3) If interest rates and investment rise, which of the following could explain these changes?

A) The government instituted an investment tax credit

B) The government went from surplus to deficit

C) The government reduced the tax rate on savings

D) The Federal Reserve buys bonds

E) None of the above is correct

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