ECONOMICS (CBSE/UGC NET)

ECONOMICS

FISCAL POLICY

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

“I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible."-Milton FriedmanThis quote might BEST be associated with which of the following?

A	supply-side economics
B	Keynesian economics
C	classical economics
D	traditional economics

Explanation:

Detailed explanation-1: -An example of an automatic stabilizer is unemployment benefits. During recessions the economy experiences insufficient aggregate demand, the unemployment benefits help to increase aggregate demand.

Detailed explanation-2: -Expansionary fiscal policy is used to fix recessions. the use of fiscal policy to contract the economy by decreasing aggregate demand, which will lead to lower output, higher unemployment, and a lower price level.

Detailed explanation-3: -Keynesian economics, recognizes the role of government finance in sparking aggregate demand. Federal spending and tax cuts leave more money in peoples’ pockets, which can stimulate demand and investment.

Detailed explanation-4: -Under what circumstances might the government use contractionary fiscal policy? when it is trying to fight inflation. Which of the following would be an appropriate caption for this political cartoon about the use of economic stimulus plans, or expansionary fiscal policy?

There is 1 question to complete.