ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Annual deficits increase
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The national debt increases
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Consumer spending decreases
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Government programs decrease
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Detailed explanation-1: -Answer and Explanation: If a tax increase finances an increase in government spending, then the disposable income gets reduced.
Detailed explanation-2: -When the government is exercising its powers by lowering taxes and increasing their expenditures, they are practicing expansionary fiscal policy.
Detailed explanation-3: -Reduction in government spending will reduce the level of aggregate demand, which will lead to fall in the income and purchasing power of the people. (The extent of fall in the income and purchasing power depends on the size of multiplier).
Detailed explanation-4: -Which of the following is a reason a government might increase government spending? It is concerned that the unemployment rate is too high.