In 2009, Congress and the president enacted \"cash for clunkers\" legislation th
ID: 1119977 • Letter: I
Question
In 2009, Congress and the president enacted "cash for clunkers" legislation that paid people buying new cars up to $4,500 if they traded in an older, low gas-mileage car.
Source: Justin Lahart, Trade-In Program Tunes Up Economic Engine," Wall Street
Journal ,
August 4, 2009.
Was this piece of legislation an example of fiscal policy?
A.
No, because the program did not have any effect on the national economy.
B.
Yes, because any government spending program is, by definition, a fiscal policy.
C.
No, because the effect of the spending program was to increase the gas mileage of cars currently on the road.
D.
Yes, because the primary goal of the spending program was to stimulate the national economy
Explanation / Answer
This piece of legislation will induce the people to buy new cars which will positively influence the domestic production and thus stimulate the national economy.
So, this piece of legislation is termed as an example of fiscal policy because, in primary terms, like other fiscal policy tools, it will also stimulate the national economy.
The correct answer is the option (D).
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