Fiscal Policy CFU

What is the main focus of demand side policies?

• Interest rates

• Aggregate demand

• Government regulations

• Aggregate supply

The key "power" for a government in fiscal policy is either (choose 2):

• TO increase or decrease TAXES

• To increase or decrease EXCHANGE RATES

• To increase or decrease INTEREST RATES

• To increase of decrease GOVERNMENT SPENDING

What is the goal of expansionary fiscal policy?

• To reduce government spending

• To increase taxes

• To lower inflation

• To shift AD to the right to create some growth

​ How a country typically use contractionary fiscal policies?​ (a)   ​

• By increasing taxes
• Increasing government spending
• Lowering interest rates

"Expansionary" fiscal policy would involve lowering (a)  

In a "deflationary gap" on the business cycle (a trough), which fiscal policy would make good sense, according to Keynesians?

• Lower government spending and lower taxes

• Increase government spending and lower taxes

• Lower government spending and raise taxes

• Increase government spending and raise taxes

What is a budget surplus?

• When there is no government spending (G)

• When tax revenue exceeds government spending (G) in a year

• When government spending (G) exceeds tax revenue in a year

• When there is no tax revenue

What is the difference between national debt and budget deficit?

• National debt is the debt in a single year, while budget deficit is the total debt

• National debt is the total debt over the years, while budget deficit is the difference between tax revenue and spending in a year

• National debt is the deficit in a year, while budget deficit is the total debt over the years

• National debt is the total tax revenue, while budget deficit is the total spending

In the long run, what do classical economists believe happens when shifting aggregate demand?

• Reduces government spending

• Increases economic growth and job creation

• Creates inflation

• No impact on the economy

What is the main difference between Keynesian and classical economists regarding fiscal policy

?

Groups:

(a) Keynesian

,

(b) Classical

• Can help a recovering in tough times

• Will lead to inflation always

• Government just gets into debt

• They object to unnecessary govt spending

• Will not support objectives

• They support govt spending

• Government can spend to grow

• Can lead to growth and jobs