Exploring Fiscal Policy and Its Impact on Macroeconomic Goals

Who believes the economy requires government intervention to adjust?

• Keynesian economists

• Both Classical and Keynesian economists

• Neither Classical nor Keynesian economists

• Classical economists

What is the primary goal of fiscal policy?

• To increase the nation's wealth

• To regulate stock markets

• To achieve macroeconomic goals like stable prices and low unemployment

• To decrease the nation's debt

Which branches of the U.S. government control fiscal policy?

• Legislative and executive

• Executive only

• Judicial and executive

• Legislative and judicial

What does expansionary fiscal policy aim to do?

• Stimulate the economy

• Increase taxes

• Decrease aggregate demand

• Cut government spending

What is a direct effect of increasing government spending?

• Increase in aggregate supply

• Decrease in aggregate demand

• Increase in aggregate demand

• Decrease in aggregate supply

Why might politicians prefer expansionary fiscal policy?

• It is easier to implement

• It reduces the nation's debt

• It is generally more popular with voters

• It increases unemployment

What is the consequence of expansionary fiscal policy on national debt?

• It temporarily increases then decreases the debt

• It increases the debt

• It reduces the debt

• It has no effect

When is expansionary fiscal policy considered appropriate?

• When the national debt is low

• During a recessionary gap

• When the economy is at full employment

• During an inflationary gap

What might a Classical economist prefer over active fiscal policy?

• Immediate government intervention

• Waiting for the market to self-adjust

• Increasing taxes regardless of economic state

• None, they always prefer fiscal policy

What is the effect of contractionary fiscal policy on aggregate demand?

• It increases aggregate demand

• It first decreases then increases aggregate demand

• It has no effect on aggregate demand

• It decreases aggregate demand