Event: There is a war. Troops are committed to fighting overseas for the next th
ID: 1119565 • Letter: E
Question
Event: There is a war. Troops are committed to fighting overseas for the next three years. They will need supplies and equipment If the government were to intervene in this event, what would be the appropriate fiscal policy, expansionary or contractionary? Event: There is a war. Troops are committed to fighting overseas for the next three years. They will need supplies and equipment If the government were to intervene in this event, what would be the appropriate fiscal policy, expansionary or contractionary? If the government were to intervene in this event, what would be the appropriate fiscal policy, expansionary or contractionary?Explanation / Answer
In the given scenario, the government will opt for the expansionary fiscal policy. As a part of this policy, the government will make purchase of supplies, products and equipment and other utilities that are required by the military overseas. These spendings as demand will encourage the firms to produce more and make investment spending. It will increase the domestic supply that will support the economy at the time of war. New employment opportunities will also help to boost the consumer confidence in the economy.
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