BACHELOR OF BUSINESS ADMINISTRATION

BUSINESS ADMINISTRATION

BUSINESS POLICY

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is
A
decreasing taxes.
B
decreasing spending.
C
decreasing the money supply.
D
decreasing the reserve requirement.
Explanation: 

Detailed explanation-1: -Increasing government spending on infrastructure that further increases the private sector productivity can increase the aggregate supply.

Detailed explanation-2: -When inflation is too strong, the economy may need a slowdown. In such a situation, a government can use fiscal policy to increase taxes to suck money out of the economy. Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation.

Detailed explanation-3: -Which of the following would be considered a fiscal policy action? A tax cut is designed to stimulate spending during a recession. increasing government purchases or decreasing taxes.

Detailed explanation-4: -Automatic stabilizers are mechanisms built into government budgets, without any vote from legislators, that increase spending or decrease taxes when the economy slows.

There is 1 question to complete.