Question

A1) Question: If the economy is in a recession, what types of fiscal policy can speed up the recovery?

A2) Question: How might a local craft market such as a farmer's market or a fruit stand generate a larger effect on output in the city than a large retailer?

Answer 1

A1) Expansionary fiscal policy is used to boost the economy.it speeds up the growth rate of economy.when there is recession and the growth in national income is not enough to maintain current living of population then it is used.

Expansionary fiscal policy do a tax cut and increment of government spending for boosting economic growth .this will decrease unemployment rates

Fiscal policy types -

1) Expenditure policy 2) Taxation policy 3) Surplus and debt management.

Expenditure policy includes government capital expenditure and government revenue expenditure. It increase government spending for fight with recession.

2) Taxation policy impose higher taxation to reduce purchasing power of people and lower taxation to increase purchasing power of people.

A2) Local craft market generate a larger effect on output in the city then a large retailer because farmer is producer of the goods hence he is being a manufacture of goods ,sale the goods at a lower rate.he does not require a huge investment for selling a product.he can sale goods anywhere.his cost of manufacture is lower but retailer does huge investment for selling a product.like retailer buy big showroom or shop for selling the goods.but craftman does not have any need for setting up a big shop.he can sale goods even from a small shop.hence as its cost for selling is product is lower ,it can sale more goods at a cheap rate and can earn big profit.but retailer cost of buying goods is higher hence he add extra cost of producing this goods in cost of production.