ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increase taxes; decrease reserve requirement
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decrease taxes; decrease discount rate
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increase spending; increase interest on reserves
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decrease spending; sell bonds via open market operations
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Detailed explanation-1: -An expansionary fiscal policy and a contractionary monetary policy would cause the interest rate to rise, investment demand to decrease but would have an indeterminate effect on aggregate demand.
Detailed explanation-2: -Both monetary and fiscal policies are used to regulate economic activity over time. They can be used to accelerate growth when an economy starts to slow or to moderate growth and activity when an economy starts to overheat. In addition, fiscal policy can be used to redistribute income and wealth.
Detailed explanation-3: -An expansionary fiscal policy may generate increased spending by government and consumers but reduced spending by investors. Which combination of policies would be the most ex-pansionary? Feedback: Both government spending and more money available for consumers to spend is the most expansionsary.
Detailed explanation-4: -Expansionary monetary policy is a tool central banks use to stimulate a declining economy and GDP.