Question

Government action during expansionary fiscal policy would involve ________, whereas contractionary fiscal policy would involve ________....

Government action during expansionary fiscal policy would involve ________, whereas contractionary fiscal policy would involve ________.

A) increasing the money supply; increasing personal income taxes

B) increasing corporate income taxes; raising interest rates

C) increasing transfer payments; increasing corporate income taxes

D) increasing government purchases; increasing transfer payments

Homework Answers

Answer #1

Expansionary Fiscal Policy includes the actions taken by government to increase the aggregate income in the economy ( In terms of graphs, by increasing aggregate demand by moving IS curve to the right). Conversely, Contractionary Fiscal Policy includes action taken by government to decrease the aggregate income in the economy (equivalent to decreasing aggregate demand by moving IS curve to the left).

So, the correct option is C.

When government increases transfer payments, aggregate demand and hence aggregate income increases and hence, it is used as an expansionary fiscal policy tool.

Whereas, when government increases corporate income taxes, aggregate demand and income reduce, and hence, it is contractionary fiscal policy tool.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If the government implements an expansionary fiscal policy, what action can the central bank take to...
If the government implements an expansionary fiscal policy, what action can the central bank take to maintain a stable itnerest rate? a. Increase the required reserve ratio b. increase personal income tax rates c. decrease personal income tax rates d. sell government bonds e. buy government bonds
1. Countercyclical fiscal policy consists of: a. using expansionary fiscal policy during times of recession and...
1. Countercyclical fiscal policy consists of: a. using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of recession. b. using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of expansion. c. using expansionary fiscal policy during times of expansion and contractionary fiscal policy during times of recession. d. using expansionary fiscal policy during times of expansion and contractionary fiscal policy during times of expansion. e. using expansionary fiscal policy and...
would you pursue expansionary or contractionary fiscal policy? would you pursue expansionary or contractionary fiscal policies?...
would you pursue expansionary or contractionary fiscal policy? would you pursue expansionary or contractionary fiscal policies? Explain why this is your position, based on the economic data youve collected and analyzed so far.
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the...
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the right. AD moving to the left. AS moving to the left. Stimulus checks and tax changes are all examples of Monetary Policy Fiscal Policy Contractionary Policy Expansionary Policy If the federal government decide a contractionary fiscal policy is ​necessary, what changes should they make in government spending or​ taxes? The federal government should enact policies that decrease government spending and decrease taxes. The federal...
In the Keynesian Model, which of the following is considered Expansionary Fiscal Policy? increasing the Money...
In the Keynesian Model, which of the following is considered Expansionary Fiscal Policy? increasing the Money Supply. decreasing the Money Supply. cutting Government purchases (G). cutting Net Taxes (T).
Briefly explain how the effectiveness of both, expansionary and contractionary fiscal policy would be affected by...
Briefly explain how the effectiveness of both, expansionary and contractionary fiscal policy would be affected by the price of elasticity of aggregate supply.
Assignment 11: Think about the two types of monetary policy: expansionary and contractionary. Using what you...
Assignment 11: Think about the two types of monetary policy: expansionary and contractionary. Using what you have learned about open market operations, determine whether the noted actions below coincide with expansionary monetary policy or contractionary monetary policy. "explain each action in at least one paragraph" Action: Government securities are sold by the Fed. Expansionary Contractionary Action: The federal funds rate decreases. Expansionary Contractionary Action: The money supply increases. Expansionary contractionary
In the Mundell prescription for monetary and fiscal policy under fixed exchange rates, expansionary fiscal policy...
In the Mundell prescription for monetary and fiscal policy under fixed exchange rates, expansionary fiscal policy and contractionary monetary policy would be recommended if a country were faced with Select one: a. unemployment and a balance-of-payments deficit. b. unemployment and a balance-of-payments surplus. c. inflation and a balance-of-payments deficit. d. inflation and a balance-of-payments surplus.
9) Following a decrease in government spending, as the price level falls we would expect the...
9) Following a decrease in government spending, as the price level falls we would expect the level of interest rates to ____ and investment to ____ A) decrease;decrease B) decrease;increase C) increase;decreas D) increase;increase 10) When an economy is in a recession, the Fed needs to do a(n) ___ monetary policy. This policy would____ prices A) expansionary; lower B) expansionary; raise C) contractionary ; lower D) contractionary; raise 11) we know the following notation: V= velocity of money M= money...
. Which of the following are concerns regarding expansionary fiscal policy, i.e. the increase in government...
. Which of the following are concerns regarding expansionary fiscal policy, i.e. the increase in government spending and decreases in taxes a. it will decrease wages b. It will create an asset bubble c. it will cause deflation d. It will increase budget deficits and the national debt 2. Savings Accounts are part of which stock of money? a. M2 b. Monetary base c. All of the above d. M1 3. The main goal of monetary policy is to a....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT