An appropriate fiscal policy for severe demand-pull inflation is:
a tax rate increase
.
What are the government's fiscal policy options for ending severe demand-pull inflation?
Fiscal policy options the government can enact to end severe demand-pull inflation include
decreasing government spending, increasing taxes, or a combination of both
. Increasing taxes is best for preserving government size while cutting government spending make the government weaker.
What would be an appropriate fiscal policy for severe inflation?
An appropriate fiscal policy for severe demand-pull inflation is:
a tax rate increase
. A contractionary fiscal policy is shown as a: leftward shift in the economy's aggregate demand curve.
What type of fiscal policy is used when inflation is a problem?
If inflation threatens, the central bank uses
contractionary monetary policy
to reduce the money supply, reduce the quantity of loans, raise interest rates, and shift aggregate demand to the left.
What are government fiscal policy options for ending severe demand-pull inflation which of these fiscal options do you think might be favored by a person who wants to preserve the size of the government which of these fiscal options do you think might be favored by a person who thinks?
the government's fiscal policy options for ending severe demand-pull inflation include:
reducing government spending, increasing taxes, or both
. A political business cycle is the concept that: politicians are more interested in reelection than in stabilizing the economy.
What fiscal policy is used during a recession?
During a recession, the government may employ
expansionary fiscal policy
by lowering tax rates to increase aggregate demand and fuel economic growth. In the face of mounting inflation and other expansionary symptoms, a government may pursue contractionary fiscal policy.
What are examples of contractionary fiscal policy?
Types of Fiscal Policy
When the government uses fiscal policy to decrease the amount of money available to the populace, this is called contractionary fiscal policy. Examples of this include
increasing taxes and lowering government spending
.
What are the government's fiscal policy options for moving the economy out of a recession?
increasing government spending, decreasing taxes
, or both. an increase in government spending. a cut in taxes. tax revenue and government payouts correct so that GDP changes are reduced.
What are two ways to measure public debt?
While the debt can be measured in trillions of dollars, it is usually measured as a
percentage of gross domestic product (GDP), the debt-to-GDP ratio
. That's because as a country's economy grows, the amount of revenue a government can use to pay its debts grows as well.
What is the absolute size of its public debt in Year 5?
What is the absolute size of its public debt in year 5? Public Debt
= $42 billion
.
What are the 3 tools of fiscal policy?
Fiscal policy is therefore the use of
government spending, taxation and transfer payments to influence aggregate demand
. These are the three tools inside the fiscal policy toolkit.
How long does it take for fiscal policy to affect the economy?
It can take a fairly long time for a monetary policy action to affect the economy and inflation. And the lags can vary a lot, too. For example, the major effects on output can take anywhere from
three months to two years
.
What are the goals of fiscal policy?
The main goals of fiscal policy are
to achieve and maintain full employment, reach a high rate of economic growth, and to keep prices and wages stable
. But, fiscal policy is also used to curtail inflation, increase aggregate demand and other macroeconomic issues.
Which of these fiscal options do you think might be favored by a person who wants to preserve the size of the government?
A person wanting to preserve the size of government might favor
a tax hike
and would want to preserve government spending programs. Someone who thinks that the public sector is too large might favor cuts in government spending since this would reduce the size of government.
How large is its cyclically adjusted budget deficit?
Since the government is running a cyclically adjusted budget deficit, this fiscal policy is expansionary. Answers:
$52 billion; 50 percent
. Feedback: Public debt is the sum of deficits and surpluses (negative deficits) over time.
Can you use discretionary fiscal policy to fine tune the economy to the full employment non inflationary level of real GDP?
Consider the following statement: “Although fiscal policy clearly is useful in combating the extremes of severe recession and demand-pull inflation,
it is impossible to use fiscal policy to fine-tune
the economy to the full-employment, noninflationary level of real GDP and keep the economy there indefinitely.”
