1. Fiscal policy is a. the use of the money supply to influence the economy b. a
ID: 1173396 • Letter: 1
Question
1. Fiscal policy is a. the use of the money supply to influence the economy b. actions taken by the Federal Reserve to influence the economy c. only used during times of recession. d. only used during times of expansion. e. the use of government spending and taxes to influence the economy. 2. Expansionary fiscal policy occurs when the to stimulate the economy toward expansion. government decreases spending or increases taxes b. a. government decreases spending or decreases taxes ernment increases spending or increases taxes c. gov d. government increases spending or decreases taxes e. Federal Reserve increases money supply 3. The goal of expansionary fiscal policy is to shift thecurve a. aggregate demand; left b. to the d. short-run aggregate supply; left e. long-run aggregate supply; left aggregate demand; right c. short-run aggregate supply; right 4. During recessionary periods, outlays increase and tax revenue falls. a. b. outlays increase and tax revenue increases. outlays decrease and tax revenue increases. c. d. outlays decrease and tax revenue falls. outlays and tax revenue stay the same. e. 5. The portion of additional income that is spent on consumption is average propensity to consume (APC). I propensity to consume (MPC) a. c. marginal propensity to save (MPS) d. average propensity to save (APS). e. I minus marginal propensity to consume (1-MPC). 6. An initial increase in government spending of $100 billion can create more than $10 through what economists call a(n) a. multiplier , enhancement effect d. aggregate supply e. wealth interest rateExplanation / Answer
1. Option e.
Fiscal policy is the use of government spending and taxes to influence the economy.
Fiscal policy influences the economy using money supply and interest rates.
The congress and other Officials influence the economy through spending and taxation.
It is a form of governments revenue collection in the form of taxes and spending.
2. Option d.
Expansionary fiscal policy occurs when the government increases spending or decreases taxes.
While the contradictionary fiscal policy raises taxes and cuts spendings.
3. Option b.
The goal of expansionary fiscal policy is to shift the aggregate demand curve to the right.
4. Option a.
During recessionary periods, outlays increases and tax revenues falls.
A recessionary period is of negative economic growth.
This leads to the increase in outlays and the tax revenues fall which causes deficits during this period.
5. Option b.
The portion of additional income that is spent on consumption is the marginal propensity to consume.
It is a metric that quantities consumption.
It specifies that consumers consumption increases with disposable income.
6. Option a.
An initial increase in government spending of $100 billion can create more than $100 through what economists call a multiplier effect.
It refers to increase in income from the injection of new demand for goods and services.
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