When the US economy is in recession which of the fiscal poli

When the US economy is in recession, which of the fiscal policies would be government adopt?

Select one:

a. reduction in food subsidies and veterans\' benefits

b. a balanced budget proposal

c. an increase in sales taxes and/or a postponement of a highway construction program

d. high import tariffs to stop exporting jobs to lower wage countries e. reduction in Federal tax rates on personal and corporate income and/or an increase in government spending

Discretionary fiscal policy refers to:

Select one:

a. any change in government spending or taxes made by the President on Twitter.

b. changes in money supply and interest rates made by the President.

c. the changes in taxes and transfers that occur automatically as GDP changes.

d. changes in taxes and government expenditures made by Congress to stabilize the economy.

Public debt is the:

Select one:

a. total of all past deficits minus all past surpluses.

b. total household and corporate debt

c. ratio of all past deficits to all past surpluses.

d. difference between current government expenditures and revenues.

Solution

When the US economy is in Recession which of the fiscal policies would be government adopt?

Answer: (e). reduction in Federal tax rates on personal and corporate income and/or an increase in government spending

Explanation: During the period of recession, there is a fall in demand for goods and services. This leads to an economic slowdown as private sector lays off workers due to fall in demand and decreased production activity as a result. The government will increase spending in key sectors of the economy in order to boost economic activity and increase employment and consumer spending. The government encourages consumer spending by cutting taxes on personal income.

Discretionary fiscal policy refers to: -

Answer: (d). Changes in taxes and government expenditures made by Congress to stabilize the economy.

Explanation: The word discretion means acting on one\'s own authority. Fiscal policy refers decisions made in view of government revenue and spending. Hence, Discretionary fiscal policy means changes to the fiscal policy made by the government which holds the authority to take such actions.

Public debt is the:

Answer: (d) Difference between current government expenditures and revenues.

Explanation: Public debt refers to the amount of money that a government owes to individuals, businesses and other governments and international bodies. It differs from consumer debt which means the amount of money the consumers owe businesses, individuals and governments.