Fiscal Policy

The use of taxes and government spending to affect the economy

• Monetary Policy
• Fiscal Policy
• Contractionary Policy
• Expansionary Policy

a plan to reduce aggregate demand and slow the economy

• Contractionary Fiscal Policy
• Expansionary Fiscal Policy
• Contractionary Monetary Policy
• Expansionary Monetary Policy

a plan to increase aggregate demand and stimulate the economy

• Contractionary Fiscal Policy
• Expansionary Fiscal Policy
• Contractionary Monetary Policy
• Expansionary Monetary Policy

An example of expansionary fiscal policy would be

• cutting taxes.
• cutting government spending.
• cutting production of consumer goods.
• cutting prices of consumer goods.

Supporters of Keynesian economics believe that

• government should be used as a tool to influence total demand in the economy.

• demand for goods increases when prices rise.

• taxes have a strong negative influence on economic output.

• the government should have a limited role in regulating the economy.

During a recession, which of the following is likely to occur?

• an increase in real wages
• an increase in production
• and increase in the GDP growth rate
• an increase in the unemployment rate

Government budget comprises of

• government spending and income tax only
• government revenue and government expenditure
• transfer payment and government revenue 
• government spending and indirect tax

A budget deficit occurs when...

• The government brings in more revenue than it spends for a given year
• The government spends more money than it brings in for a fiscal year

Which are contractionary fiscal policies -- meant to slow down speedy economic growth?

• increased taxation and increased government spending

• increased taxation and decreased government spending

• decreased taxation and no change in government spending

• no change in taxation and increased government spending

Which are expansionary fiscal policies -- meant to increase GDP (or grow the economy)?

• lower taxes and decrease government spending

• raise taxes and increase government spending

• lower taxes and increase government spending

• raise taxes and decrease government spending