Raising tax rates is an example of expansionary fiscal policy. Question 10 options: a) Trueb) False
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Expansionary fiscal policy involves increasing government spending or decreasing taxes to stimulate economic growth. Show more…
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Identify each of the following as i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy. a. The personal income tax rate is lowered. b. The government increases spending on defence due to a change in spending priorities. c. The company income tax rate is lowered. d. The State of New South Wales builds a new tollway in an attempt to expand employment and ease traffic congestion.
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Write 'True' if the statement is correct and 'False' if the statement is incorrect. 1.The increase in revenue taxation received by the government during an economic boom is due to discretionary fiscal policy. 2.Government purchases and transfer payments are included in the measure of government expenditures. 3. ‘Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand. 4.An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to increase interest rates. 5.Suppose real GDP is $1.3 trillion, and potential GDP is $1.35 trillion. If the government increases government purchases by $0.5 trillion, then the economy will be brought to equilibrium at potential GDP.
Expansionary fiscal policy refers to……………, while restrictive fiscal policy refers to …………… a. an increase in taxes; an increase in government spending. b. an increase in government borrowing; a decrease in government spending. c. an increase in government spending; an increase in taxes. d. an increase in government spending; a decrease in taxes.
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