Suppose the economy had been producing at natural real GDP but is now experienci

Question

Suppose the economy had been producing at natural real GDP but is now experiencing a recession. Which of the following are discretionary fiscal policies that could bring the economy closer to natural real GDP?Check all that apply.

A tax cut

A reduction in government purchases

A tax hike

Additional spending on national park facilities

In the preceding scenario, is the discretionary fiscal policy needed to bring the economy closer to natural real GDP an example of expansionary fiscal policy or contractionary fiscal policy?

Contractionary or Expansionary

Explanation / Answer

The correct answer is option (A) tax cut

The correct answer is Contractionary

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