Question

In: Economics

If you felt it was necessary to implement contractionary fiscal policy, would you choose to increase...

If you felt it was necessary to implement contractionary fiscal policy, would you choose to increase taxes or decrease government spending? Why?

Solutions

Expert Solution

ANSWER:

Diminishing government consumption is more successful than expanding charges in light of the fact that the administration spending multiplier has a more noteworthy incentive than charge multiplier. anyway the two approaches will decrease the yield and the pace of expansion in the economy. However the decrease in yield will be more prominent when there is a decrease in the administration spending on products and ventures. Additionally, charge increment isn't viewed as a decent motivator for citizens and corporate on the grounds that it debilitates venture and utilization use in close and far off future.

Simultaneously it relies on the goal of the legislature. The legislature has a target of controlling swelling, at that point it is suitable to utilize burdens as an instrument of contraction monetary arrangement in light of the fact that the impact on GDP will be moderated, contrasted with the administration consumption as a device of financial approach.


Related Solutions

Which of the following would not be considered pure contractionary fiscal policy? A. A cut in...
Which of the following would not be considered pure contractionary fiscal policy? A. A cut in taxes matched by an equal cut in spending. B. A cut in spending used to finance a cut in the money supply. C. A cut in spending in order to buy back some outstanding government bonds. D. A tax increase used to buy back some outstanding government bonds.
Explain thoroughly when an expansionary fiscal policy is appropriate and when a contractionary fiscal policy is...
Explain thoroughly when an expansionary fiscal policy is appropriate and when a contractionary fiscal policy is appropriate.    Explain the three fiscal policies that can be used in expansionary fiscal policy.  Each policy must come with an example.   Explain the three fiscal policies that can be used in contractionary fiscal policy.  Each policy must come with an example.   Please leave any websites you use thanks! :)
What would be appropriate fiscal ( expansionary or contractionary ) policy for our economy right now?...
What would be appropriate fiscal ( expansionary or contractionary ) policy for our economy right now? and why?
What are the four advantages and disadvantages of contractionary fiscal policy?
What are the four advantages and disadvantages of contractionary fiscal policy?
An example of policy aimed towards long run growth would include; contractionary monetary policy expansionary fiscal...
An example of policy aimed towards long run growth would include; contractionary monetary policy expansionary fiscal policy an active debt reduction policy a policy aimed at encouraging immigration
Explain the differences between an Expansionary and Contractionary fiscal policy. When would each be used? What...
Explain the differences between an Expansionary and Contractionary fiscal policy. When would each be used? What would be done in each circumstance? What would be the results?
How would both the Federal Reserve and Government carry out contractionary (Monetary or Fiscal) policy? What...
How would both the Federal Reserve and Government carry out contractionary (Monetary or Fiscal) policy? What event in the overall economy would be the opportune time to use contractionary policy? Why is it difficult for the Government to use contractionary fiscal policy?
Q1) Explain the difference between contractionary and expansionary fiscal policy. Regarding the business cycle, when would...
Q1) Explain the difference between contractionary and expansionary fiscal policy. Regarding the business cycle, when would you use each type of fiscal policy? Explain you answer with sufficient detail so the instructor has clear evidence that you under the difference between the policies, the types of action each policy might entail, and the economic impact of each.
show on the IS-LM graph: What are the effects of a contractionary fiscal policy abroad on...
show on the IS-LM graph: What are the effects of a contractionary fiscal policy abroad on the Canadian output and interest rate? What are the effects of a contractionary monetary policy abroad on the Canadian output and interest rate?
q11. A contractionary fiscal policy by a government may result in which of the following? An...
q11. A contractionary fiscal policy by a government may result in which of the following? An increased trade deficit a reduction in government borrowing crowding out of private investment lower interest rates q12. How federal government taxing and spending affects aggregate demand is the point of corporate policies. the point of fiscal policy. the point of monetary policy.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT