GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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While the economy is expanding
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When a recession lasts too long
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When inflation is too high
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While the economy is contracting
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Detailed explanation-1: -Fiscal policy is the use of government spending and taxation to influence the economy.
Detailed explanation-2: -The tools of fiscal policy also aim to stabilise the economy during various inflationary pressures. In the short term, the governments may focus on macroeconomic stabilisation by cutting taxes and increasing spending to boost a weak economy or increase taxes and reduce spending during inflation.
Detailed explanation-3: -Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.
Detailed explanation-4: -There are two types of fiscal policy: Contractionary fiscal policy and expansionary fiscal policy. Contractionary fiscal policy is when the government taxes more than it spends. Expansionary fiscal policy is when the government spends more than it taxes.