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Which of the following is considered a contractionary fiscal policy?

a. The government increases defense spending due to a change in priorities.

b. The government increases the income tax rate.

c. The government reduces family benefits for high-income families to reduce inequality.

d. A state (not federal) government cuts highway spending to balance its budget.

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Joshua Stredder
Joshua StredderLv10
4 Apr 2021

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Related questions

Identify each of the following events as:

a) part of an expansionary fiscal policy

b) part of a contractionary fiscal policy

c) part of an expansionary monetary policy

d) part of a contractionary monetary policy

The corporate income tax rate is increased.

 

Defense spending is increased.

 

Families are allowed to deduct all daycare expenses from their federal income taxes.

 

The individual income tax rate is decreased.

The Federal Reserve Bank buys Treasury securities.

Each year since winning control of the House of Representatives in the 2010 election, Tea Party Republicans have argued that we need to immediately initiate sharp reductions in government spending and entitlement programs and rapidly move towards a balanced budget, (although they have never actually produced a budget proposal in which tax revenues would match government spending plus entitlement transfers). Many Democrats, while arguing that tax rate increases on high-income earners need to be part of any deficit-reduction program, have agreed that we need to initiate budget deficit reduction now.

A) What is the argument against attempting to balance the Federal Government budget rapidly at present via either deep cuts in Federal Government spending or sharp increases in federal income tax rates?
B) Does this argument imply that budget deficits don't matter in the long run? If not, why might the impact of large deficits predicted in the long run under current tax and spending programs be different than the impact today? Explain.

Q38. The most effective means of stimulating the economy during a recession is for the federal government to
a. increase spending and hold taxes
b. hold government spending and decrease taxes
c. decrease government spending and hold taxes
d. decrease government spending and raise taxes

Q39. The tax rebate of 2008 is an example of
a. expansionary monetary policy
b. contractionary fiscal policy
c. contractionary monetary policy
d. pump priming

Q40. A decrease in the economy's capacity utilization rate
a. tends to decrease the unemployment rate
b. tends to increase the unemployment rate
c. has no impact on the unemployment rate
d. tends to have an unpredictable effect on the unemployment rate

Q41. When the federal budget is used as a tool for economic stabilization, the ideal goal is to
a. balance the budget over the entire business cycle
b. balance the budget each year
c. balance the budget during expansions
d. run a surplus during contractions

Q42. The gasoline tax is based on the principle of
a. cost of service
b. benefit received
c. ability to pay
d. equality of sacrifice

Q43. A loan is said to be productive if it
a. increases the purchasing power of the borrower
b. increases the present utility of the borrower's possessions
c. ultimately costs less to repay than it was worth when borrowed, due to inflation
d. increases the borrower's total output and profits

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