A recession is often the result of what type(s) of economic disruption? Check all that apply....

A recession is often the result of what type(s) of economic disruption?

Check all that apply.

	A.	Medical crisis
	B.	Supply shock
	C.	Demand shock
	D.	Unemployment crisis/ shock
	E.	Financial shock
	F.	aggregate demand shortfall
	G.	Shortage shock

Fiscal policy is

	A.	Government increasing taxes and lowering spending
	B.	Federal Reserve lowering interest rates to encourage borrowing.
	C.	Government increasing spending or lowering taxes
	D.	Federal Reserve raising interest rates to discourage lending

Expert Solution

Since a recession is the time period of the economy in which the price level is quite low and the demand for goods and services is also very low. So the unemployment rate is very high, therefore the purchasing power is very low. Therefore there is a need for government intervention by increasing its expenditure and decreasing tax rate. So that aggregate demand could increase.

Hence the recession can be due to following reasons.

Supply shock, demand shock, Financial shock, aggregate demand shortfall, Unemployment crisis/ shock and shortage shock.

Hence option B, C, D, E, F and G are correct answer.

2.

Fiscal policy is used by the government and for fiscal policy government either change government expenditure or change in the taxes.

In Contractionary fiscal policy, therefore government either decreases the government spending or increase tax.

Since the expansionary fiscal policy means either an increase in the government expenditure or decrease in the tax. This policy is used for increasing aggregate demand.

Since option A and C are example of fiscal policy.

Hence option A and c are correct answer.

Rahul Sunny answered 2 years ago

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