Fiscal Policy

What does fiscal policy primarily relate to?

• Government decisions on interest rates and money supply.

• Government decisions on taxation and spending.

• Central bank actions to control inflation.

• International trade agreements.

Which of the following are categories of government spending mentioned in the video?

• Services, transfer payments, and investment.

• Taxation, borrowing, and interest rates.

• Monetary policy, fiscal policy, and trade policy.

• Private consumption, private investment, and net exports.

What is an expansionary fiscal policy designed to do during a recession with high unemployment?

• Decrease government spending and increase taxes.

• Increase government spending or reduce taxes to increase aggregate demand.

• Reduce the money supply to control inflation.

• Encourage private investment by raising interest rates.

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What is the "crowding out effect" in the context of expansionary fiscal policy under full employment?

• Government spending stimulating private consumption.

• Increased government investment replacing private investment due to limited resources.

• Reduced taxes leading to increased savings by individuals.

• Government borrowing leading to lower interest rates.