Expansionary fiscal policy quiz

What does expansionary fiscal policy refer to?

• Reducing taxes and increasing government spending

• Maintaining the current tax rates and government spending

• Increasing taxes and reducing government spending

What is a recessionary gap?

• When a country's real GDP is higher than its GDP at full employment

• When a country's real GDP is not related to its GDP at full employment

• When a country's real GDP is lower than its GDP at full employment

Why did the Japanese government's significant borrowing not lead to the traditional crowding-out effect during the period of deflation and economic stagnation?

• High inflation rates attracted foreign investments, offsetting any potential crowding out.

• Low-interest rates maintained by the Bank of Japan prevented significant increases in borrowing costs, thus not crowding out private investment, but rather reducing the urgency of concerns for continued government borrowing

• Rapid economic growth led to an increase in private investment, overshadowing any government borrowing effects.

What is the fiscal multiplier?

• The ratio of change in national income arising from a change in government spending

• The ratio of change in national income arising from a change in consumer spending

• The ratio of change in national income arising from a change in investment

What was the impact of expansionary fiscal policy on Japan's GDP growth?

• It decreased from -2.1% to 2.6%

• It increased from -2.1% to 2.6%

• It remained constant at -2.1%

1. What was one of the impacts of Japan's 'Construction State' policy?

• 1. Increased investment in education and R&D

• 1. A reduction in unemployment and increased economic activity

• 2. A significant increase in social services and welfare programs

What was the impact of expansionary fiscal policy on unemployment in Japan?

• It remained constant at 5.3%

• It decreased consistently over the years

• It initially reduced but ultimately increased

What was the impact of expansionary fiscal policy on producer revenues in Japan?

• It remained constant for all industries

• It increased for the electronics industry but decreased for other industries

• It decreased for all industries

What was the impact of expansionary fiscal policy on consumers' disposable income in Japan?

• It decreased due to higher taxes although wage growth was even, explaining how keynesian policies can work effectively

• It increased due to tax cuts although wage growth was uneven, explaining concerns about how keynesian policies can create imbalances (skilled getting wage increases and unskilled are not)

• It decreased due to reduced government spending

1. How did Japan's expansionary fiscal policy affect its government debt-to-GDP ratio?

• It remained below 50%

• It decreased to sustainable levels

• It rose exponentially, surpassing 100% of GDP