A decrease in net taxes All of the following are tools of fiscal policy except o

Question

A decrease in net taxes All of the following are tools of fiscal policy except one. Which is the exception Taxes Transfer payments Interest rates Govemment purchases of goods Govemment purchases of services O raises aggregate expenditure by raising disposable incomc, heidy incrtaning co O raises aggregate expenditure by raising disposable income, therby decreangcunpcion O lowers aggregate expenditure by lowering disposable incoms, thereby decreasing consunption O lowers aggregate expenditure by lowering disposable i come, consu pueren ueant O has no effect on aggregate expenditure Which of the Sollowing is most likely to elose a recessionary gap in the cconcmy The distinction between discretionary fiscal policy and the use of automatic stabilizers is that OA decrease in the expenditure on infrastructure only discretionary fiscal policy can stimulate the economy. An increase in the income tax rate An ncrease in the fate of foreign exchange Adocrease in money supply only automatic stabilizers can stimulate the economy discretionary fiscal policy, once adopted, is built into the structure of the economy. automatic stabilizers, once adopted, are built into the structure of the economy only discretionary fiscal policy can be used by the federal government O An increase in the compensation Sor governmest employees lfgovernment purchases increase and net taxes decrease,A federal budget deficit occurs when: the price level will fall O money supply must rise 0 the aggregate demand curve shifts leftward there is deflation. federal government purchases exceed net taxes. there is inflation. aggregate demand is greater than aggregate supply. aggregate supply is greater than aggregate demand. Fiscal policy focuses on manipulating O O aggregate demand to smooth out business fluctuations aggregate supply to smooth out business fluctuations both aggregate supply and aggregate demand to smooth out business fluctuation demand to stimalate the economy and aggregate supply to contract ituut and employment will increase short-run aggregate supply to stimulate the economy and aggregate demand to contract it Which of the following would increase aggregate demand? Fiscal policy O A deficit in the government budget O uses the federal government's powers of spending and taxation to affect employment, the perice level,Anincrease in taxes and GDP OAn increase in govemment borrowing O uses the federal government's control over the money supply and interest rates to affect employment the price level, and GDP O can affect employment and prices, but not the level of GDP. O can affect employment and the level of GDP, but not the price level. O is most effective when employed by state governments rather than by the federal government A surplus in the government budget To close a recessionary gap using fiscal policy, the government can: In which of the following ways does government affect the consumption component of planned aggregate expenditures? increase govemment spending by the size of the gap. net taxes, which change disposable income O decrease government spending by the size ofthe gap. By purchasing goods and services, which increase consumption By using subsidies By reducing the interest rate to encourage firms to invest increase govemment spending by more than the size of the gap. increase govemment spending by less than the size of the gap. decrease government spending by more than the size of the gap. to encourage firms to invest O

Explanation / Answer

1. Option 3: Interest rates

Explanation: Interest rate is part of the monetary policy which is conducted by the central bank. The fiscal policy only deals with the revenue and expenses of the government. Fiscal policy includes taxes, transfer payments, government purchase of goods and services, etc.

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