ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increasing government spending and increasing tax
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Increasing government spending and decreasing tax
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Decreasing government spending and increasing tax
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Decreasing government spending and decreasing tax
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Detailed explanation-1: -Pumping money into the economy by decreasing taxation and increasing government spending is also known as “pump priming.” In the meantime, overall unemployment levels will fall. With more money in the economy and less taxes to pay, consumer demand for goods and services increases.
Detailed explanation-2: -The goal of expansionary fiscal policy is to reduce unemployment. Therefore the tools would be an increase in government spending and/or a decrease in taxes. This would shift the AD curve to the right increasing real GDP and decreasing unemployment, but it may also cause some inflation.
Detailed explanation-3: -Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
Detailed explanation-4: -Some of the most common benefits of fiscal policy are: The fiscal policy can reduce the level of unemployment in the economy by using expansionary fiscal policies. It involves increasing government spending and real income through reduced taxes.
Detailed explanation-5: -Alternately, rather than lowering taxes, the government may seek economic expansion by increasing spending (without corresponding tax increases). Building more highways, for example, could increase employment, pushing up demand and growth. Expansionary fiscal policy is usually characterized by deficit spending.