ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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lowering taxes and buying bonds
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lowering taxes and raising the reserve requirement
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increasing taxes and lowering the discount rate
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increasing taxes and selling bonds
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Detailed explanation-1: -It is implemented to discourage savings and increase consumer spending. Such low or negative rates are aimed at increasing inflation as it promotes increased spending and lower savings.
Detailed explanation-2: -To combat inflation, the government could use contractionary fiscal policy. In this case, it might raise taxes and decrease government spending in an attempt reduce the total level of spending.
Detailed explanation-3: -Unfortunately, in order to reduce unemployment, the primary negative effect of expansionary policy is inflation. An increase in the money supply can lead to inflation if it outpaces the growth of the economy.
Detailed explanation-4: -Increasing government spending on infrastructure that further increases the private sector productivity can increase the aggregate supply.