Macroeconomics Chapter 16 Quiz Solution

Q.1.

Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.

Q.2.

Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.

Q.3.

Government spending increases interest rates and decreases private investment.

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The term "crowding out" refers to a situation where:
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Why might cutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing inflation?
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Some spending and taxes increase or decrease with the business cycle. This event often has an effect on the economy that is similar to fiscal policy and is called
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What is a contractionary fiscal policy?

Q.4.

The legislative process experiences longer delays than monetary policy.

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Some spending and taxes increase or decrease with the business cycle. This event often has an effect on the economy that is similar to fiscal policy and is called
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What is a contractionary fiscal policy?
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The term "crowding out" refers to a situation where:
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Why might cutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing inflation?

Q.5.

Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.