Question

4. Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy. (50 points)

a) The personal income tax rate is lowered.

b) Congress cuts spending on defense.

c) College students are allowed to deduct tuition costs from their federal income taxes.

d) The corporate income tax rate is lowered.

e) The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.

Please answer all of them thank you!!! :)

Answer 1

Contractionary fiscal policy are those policy where government policy decreases aggregate expenditure whereas expansionary fiscal policy is where aggregate expenditure of an economy increases and there is an expansion of output

Expansionary fiscal  policy is

a) personal income tax is lowered

C) when college students can deduct their tuition fees from federal tax income then there disposable income decreases

E) when states of Nevada builds a new tollway in an attempt to expand employment and ease traffic

Contractionary fiscal policy

B) congress cuts spending which will lead to decrease in aggregate expenditure

not a part of fiscal policy D. When there is a decrease in corporate income tax then it doesnot change aggregate expenditure which will lead to no change in fiscal policy